The XJO is expected to open lower this morning. The U.S was up overnight but Trump presented the details of his global tariff plans at roughly 7:30 this morning (AEST), soon after their market closed. U.S futures are tanking in response, pulling our market down with them.
The DOW is down just over 1000 points and the SP500 is down just over 200 points at time of writing. However, the bomb has only just dropped, and the spike in volatility could spell anything. We won’t have a better idea until the dust settles in the coming days.
For our market, this is so far translating to an open just below 7,850 – the lows of Monday. This is an almost surprisingly muted response. If U.S futures continue to point to mayhem tonight, however, it seems reasonable to expect our market much closer to key support at 7,750 today.
With so many countries being hit with tariffs, what the implications are, who will fair better and worse, and what the flow on effects are, will all take time to be digested. We should expect volatility to remain.
Typically, we would expect key support at 7,750 to hold, which at this stage is still almost 100 points away. However, if the U.S market decides to send Trump a message, we should expect the selling to continue.
Trump has quite a large ego. He has also been quite sensitive to market movements in the past, often using market performance as a gauge for how well he is doing. He will likely be taking note of the market’s response. There is a decent chance that he comes out a bit more dovish, not just to help markets, but also as part of a cliché negotiation tactic – start hard, then ease off to make your second offer seems more reasonable. It would be in step with how he has approached his tariff plans already.
US Markets
US shares again opened lower overnight before rallying late to close higher. US futures finished ahead of Trump’s liberation day tariff announcements, and since their market closed, US futures have fallen strongly, though they are whip-sawing back and forth. President Donald Trump announced a 10 per cent baseline tariff for all countries (including Australia), which was lower than some had feared. But he also plans to impose 34 per cent tariffs on China, 20 per cent on the European Union and 24 per cent on Japan. President Trump said more specific reciprocal tariffs would come in about a week’s time, and this could include additional tariffs against Australian beef. To reiterate, tariffs aren’t good for the economy, they reduce growth and increase prices. Should these tariffs remain for any period of time, the chance of a US recession will start to dramatically increase.
Nine of the eleven sector groups of the SP500 closed higher overnight, Discretionary, Industrials, Financials, and Materials were the strongest performers. No sector saw major selling. US futures are strongly lower at present, so these sectors could look very different tonight.
Technically, the SP500 returned to the downtrne line (which is currently sitting below 5,700) and it will likely bounce down from this level. Given this, we would expect a move back to the support at 5,550. The index is in a descending triangle between the support and downtrend line and we will need to wait for a break of either of these levels until we can form a technical directional view.
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