Last week, I wrote that the ASX200 was having a good week, where Australian investors were reacting to Australian earnings reports and how companies had fared, in the face of an unusually quiet Donald Trump.
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While we started to see higher oil prices in late Week 8, those benchmarks responding to growing concerns the U.S. might fly bombers into Iran again, it was on the whole a fairly strong week with no chaos from the U.S. (read: the U.S. President).
The XJO climbed back over 9,000, and thanks to the aggregate data points of ASX earnings season reports thus far, it looks like our economy is doing pretty well. Cue a nice stable week where the market perhaps did what it’s supposed to: Act as a gauge for the Australian private sector’s health.
At one point last week, the XJO was even up over +4% YTD.
But that’s no longer the case – we’re back to trying to predict how the shifting policies of Trump will echo back into our own economy.
SCOTUS’s surprise ruling
You likely know why by this point: Over the weekend, more or less, the Supreme Court of the United States ruled that Trump’s existing tariff policies have been illegal, given that the legislation he’s been using to justify them was ruled to be invalid to provide a legal safeguard.
This verdict was seen as a surprise by many, likely because Trump has been stacking the Supreme Court with sympathetic justices for years.
(His favourite pick, Brett Kavanaugh, abstained from making a decision in the ruling; so did two other justices.)
Some appointees Trump picked were even lambasted by the US President on his website, Truth Social.
At any rate, Trump has since jumped to another piece of legislation to defend a re-imposed global 15% tariff – a deal that improves some countries’ fates and challenges others, like our own, given Australia had already secured a 10% tariff.
It’s not entirely clear in any meaningful (or non-meaningful) sense if already-tariffed countries are now expected to obey old ‘deals’ or observe the new 15% tariff, and U.S. importers are still paying tariff rates that existed before last week’s SCOTUS decision. Once again, uncertainty is back. Hoo-rah.
Initial market reactions tempered
When the news dropped late last week, Wall Street had a decent night in the U.S.; and European stock markets also climbed. But as of Monday, Australia time, U.S. futures are in the red as the market struggles to make sense of all this.
As for Australia on Monday, we’ve taken a cautious bent, too. The XJO was down -0.4% heading into afternoon trades intraday Monday, despite what looked like a modest green day out the gate at 10am AEDT.
South Korea, it’s maybe worth noting, has shrugged off the panic, though – the KOPSI hit a fresh record on Monday; Japan is shut.
While China’s markets are also shut due to the Lunar New Year, re-opening on Tuesday, it will be most interesting to observe how markets in the Red Dragon (Fire Horse?) economy react – and it will be interesting to see if that has any impact on the ASX intraweek, too. I doubt it, but, there’s no real precedent for this situation.
And that lack of precedent is worth clarifying. I don’t mean that the U.S. President has installed global sweeping tariffs on allies and foes alike; there’s precedent for that now from last year’s April 2 fiasco.
This new precedentless world I refer to is one where the U.S. President has been told by the U.S. Supreme Court that his tariffs are illegal, and so now, he’s just re-imposed them under an equally untested piece of legislation.
At least we’ve all had some experience navigating this kind of goalpost shifting before.
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