The Overnight Report: Tariff Rollercoaster

This story features NEUREN PHARMACEUTICALS LIMITED, and other companies. For more info SHARE ANALYSIS: NEU

ASX200 futures are pointing to a positive start, up 18 points, but US markets finished off the intraday highs, and ongoing tariff uncertainty continues to cloud sentiment as first-quarter US earnings roll on.

Good Morning,

Overseas markets ended higher, despite a volatile US session over conflicting tariff statements from the Administration and strong Chinese export data.

Aussie market rallies to start the Easter week

The Australian market rallied yesterday following the temporary (?) tariff exemptions in the US on the technology sector. The ASX200 rallied 1.3% to 7749, and ten out of eleven sectors rose, boosted by tech, healthcare, banks and miners. Consumer staples were weaker as supermarkets faded.

What happened overnight

An early surge saw the S&P 500 trade up as much as 1.8%, but the index settled 0.8% higher than Friday after briefly turning negative and bouncing off its session low around midday. 

Buying interest was triggered by relief that smartphones, laptops, semiconductors, solar cells, and other electronic items will be exempt from the 10% global tariffs and the 125% tariff rate on imports from China. 

The subsequent deterioration was caused by an understanding that imports from China are still subject to the 20% fentanyl-related tariff.

Also, Commerce Secretary Lutnick clarified that the exemptions will be temporary, and President Trump said that he will soon announce a tariff rate for semiconductors.

The ebb and flow of equities was also driven by volatile movements in mega caps. Nvidia slipped -0.2% and was an influential name in that respect, trading up as much as 3.0% at its high and trading down as much as -1.7% at its low.

Ten of the eleven S&P500 sectors ultimately closed in the green, and seven of them finished more than 1.0% higher, including the financial sector, helped by a positive response to above-consensus quarterly results from Goldman Sachs, up 1.9%.

Interest rate-sensitive real estate added 2.2% and utilities rose 1.8% as the defensive sectors led as market yields dropped. The 10-yr yield dropped -13 basis points to 4.36% and the 2-yr yield dropped -12 basis points to 3.83%.

There was no notable US economic data today. This week’s calendar features March Retail Sales on Wednesday, and March Housing Permits and Building Permits on Thursday. There is also an ECB meeting on Thursday and the central bank is expected to announce a 25-basis point rate cut.

US Indices year-to-date

-Dow Jones Industrial Average: -4.8%
-S&P500: -8.1% 
-S&P Midcap400: -11.7% 
-Nasdaq Composite: -12.8% 
-Russell 2000: -15.7% 

Equities Gain on Tariff Optimism: Extract Jose Torres, Interactive Broker

President Trump’s weekend decision to adopt a softer stance on electronic imports from China is fueling a rally in big tech, and despite expectations that the tariff reprieve will only offer short-term relief, as the Commander in Chief alluded, animal spirits are being bolstered by the White House’s empathetic tilt. 

But it’s not just shares of the magnificent 7 that investors are picking up; we’re seeing buying activity in forecast contracts across the yield curve and in cyclical commodities. 

Furthermore, our IBKR ForecastTrader prediction marketplace has been dialing down the odds of recession in light of incrementally tempered trade confrontations. Another part of the rising optimism is the expectation of a robust retail sales report, which is out this Wednesday.

Investors are viewing the softening in trade rhetoric as a bullish sign that the Trump administration is growing attentive to capital market developments. 

Traders are also gaining confidence that the Trump put is closer to today’s prices than the Fed put, although folks consider that both are moving targets. 

Still, the optimistic start of this week is fueled by hopes that the White House will approach negotiations increasingly tactfully, which bolsters economic growth expectations. 

Finally, even though volatility has been declining heavily, it remains well above historical averages, signaling the expectation of ongoing turbulence in stocks and rates alike.

ANZ Bank Extract: Australian Morning Focus

Christopher Waller, a member of the Federal Reserve Board of Governors discussed tariffs scenarios. 

His speech outlined two scenarios: 1) high and long-lasting tariffs, and 2) further negotiations and concessions that result in the average tariff rate settling around 10%. 

Under scenario 1, he would expect the inflationary effects of higher tariffs to be temporary, but the effects on output and employment could be longer-lasting and an important factor in determining the appropriate stance of monetary policy. 

If the slowdown is significant and threatens a recession, then he would expect to favour cutting the FOMC’s policy rate sooner and to a greater extent than he had previously thought. 

Under scenario 2 he would support a limited monetary policy response. Anchored or even lower inflation expectations as the economy slows, combined with the view that smaller tariff effects are temporary, gives the FOMC room to adjust policy as progress on the underlying trend in inflation emerges in price data

Corporate news in Australia 

– Neuren Pharmaceuticals ((NEU)) received US Food and Drug Administration approval for the endpoints of its phase 3 trial of drug NNZ-2591.

– DroneShield  ((DRO)) secured five repeat contracts from a “close military ally of Australia in the Asia-Pacific region” worth $32.2 million.

– EBR Systems ((EBR)) received US Food and Drug Administration approval for its cardiovascular device in a milestone.

– Botanix Pharmaceuticals ((BOT)) raised $40 million via an equity issue at 33c per share.

-Bellevue Gold ((BGL)) raises $156.5m, the COO quits and the company starts a strategic review.

On the calendar today:

-AU April RBA mins

-EZ April ZEW

-UK Feb Unemployment

-AMPLITUDE ENERGY LIMITED ((AEL)) 3Q Qtr update

-AUTOSPORTS GROUP LIMITED ((ASG)) ex-div 3.50c (100%)

-EVOLUTION MINING LIMITED ((EVN)) 3Q Qtr update

-HUB24 LIMITED ((HUB)) 3Q Qtr update

-SDI LIMITED ((SDI)) ex-div 1.50c (100%)

-WASHINGTON H. SOUL PATTINSON AND CO. LIMITED ((SOL)) ex-div 44c (100%)

FNArena’s four-weekly calendar: https://fnarena.com/index.php/financial-news/calendar/

The Australian share market over the past thirty days

For more detail go to FNArena’s Australian Broker Call Report, which is updated each morning, Mon-Fri.

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