ASX rallies after Monday’s carnage; tech, energy stocks soar

The Australian sharemarket posted its biggest gain in more than two years on Tuesday as investors waded back into stocks after the bloodbath on Monday, emboldened by rising US market futures and speculation about interest rate cuts.

The S&P/ASX 200 jumped 166.70 points, or 2.3 per cent, to 7510 at the close, with all 11 industry sectors advancing, led by tech and energy stocks. The reprieve came despite a manic session on Wall Street overnight as US President Donald Trump threatened to crank his tariffs even higher.

Tuesday’s gains helped recoup some of the ASX’s 4.2 per cent plunge on Monday, its biggest fall since the COVID-19 pandemic of 2020 as a sell-down wiped almost $100 billion from the local market. The Australian dollar, which had plunged to five-year lows of less than US60¢ on Monday, was trading 1.4 per cent stronger at US60.65¢ as of 4.44pm AEST.

The Australian sharemarket recouped some of its losses since last week’s “Liberation Day”.Credit: FDC

Despite the gains, investors were bracing for more volatility in the coming days – an overall caution that was also reflected in the Westpac consumer sentiment index released in the morning, which slumped 6 per cent to a six-month low in April as the escalating tariff war and the market gyrations hit home.

The plunge in consumer sentiment “gives a very early read into the impact of President Trump’s tariff policies,” said Ivan Colhoun, chief economist at CreditorWatch. “The key now is the longevity of these tariff settings or the provision of additional policy support, and while there are some suggestions the US may be open to compromise, that can’t be assumed.”

Tim Waterer, chief market analyst at KCM Trade in Sydney, also sounded caution for investors.

“It’s too early to say that we have turned the corner, particularly with Trump still floating the idea of additional tariffs on China,” he said. “There are lots of moving parts, and a recession remains in the equation as a possibility while the US continues to play hardball with tariffs.”

‘It’s too early to say that we have turned the corner, particularly with Trump still floating the idea of additional tariffs on China.’

KCM market strategist Tim Waterer

Still, trading on Tuesday was buoyed by hopes that Wall Street may have hit bottom, or be close to it, as S&P 500 futures were up 1.3 per cent around the market close. Rate cut speculation was also helping, following a forecast by Deutsche Bank economist Phil O’Donoghue that the Reserve Bank will cut its key interest rate by an outsized 50-basis points next month because of the Trump tariffs’ impact on business and consumer confidence and Australia’s economy.

O’Donoghue was the first bank economist to call for a half-point central bank cut next month in response to Trump’s barrage of global tariffs. Financial market pricing implies four Reserve Bank reductions this year, with a 40 per cent chance of a 50-basis-point easing next month.

Tech stocks led the market rebound, in which some of the market’s hardest-hit sectors in the sell-down trimmed their recent losses. The nation’s biggest IT stock, WiseTech, rose 5 per cent, while software companies Xero and Technology One gained 4.3 per cent and 7 per cent, respectively, and family member tracking app Life360 rallied 8 per cent.

Energy stocks powered ahead, led by oil and gas majors Woodside (up 3.3 per cent) and Santos (up 5.4 per cent), as oil rebounded after a three-day slump amid the slightly calmer tone in global markets. Brent rose above $US65 a barrel after hitting a four-year low in the previous session, while West Texas Intermediate traded near $US62.

Consumer-spending related companies also advanced, with Wesfarmers – owner of Bunnings, Kmart and Officeworks – climbing 3 per cent, while pokies giant Aristocrat gained 3.8 per cent and retailers JB Hi-Fi and Harvey Norman rose 3.4 per cent and 3.9 per cent, respectively.

Defying a lower iron ore price, mining heavyweights BHP, Fortescue Metals and Rio recouped some of their heavy recent losses, with gains of 2.3 per cent, 3.5 per cent and 1 per cent. Coal miners Yancoal (up 2.6 per cent) and Whitehaven Coal (up 8.7 per cent) also gained.

Financial stocks, which make up about a third of the Australian sharemarket, also advanced, with Commonwealth Bank – the biggest stock in the local market – up 2.8 per cent. Westpac rose 1.4 per cent while National Australia Bank and ANZ Bank added 0.9 per cent.

Healthcare stock rose, led higher by biotech giant CSL, which added 1.6 per cent. Cochlear rose by a comparatively modest 1.2 per cent even after saying it can use an exemption to import its hearing implants into the US without having to pay the 10 per cent tariff for Australian goods.

On Wall Street overnight, the S&P 500 slipped 0.2 per cent at the end of a day full of heart-racing reversals as battered financial markets try to figure out what Trump’s ultimate goal is for his trade war.

Trump threatened drastically higher tariffs on Chinese goods overnight, while giving his strongest signal to date that he will lower tariffs on countries that agree to remove their own trade barriers.

The Dow Jones fell 0.9 per cent, and the Nasdaq composite edged up by 0.1 per cent.

All three indexes started the day sharply lower, and the Dow plunged as much as 1700 points. But it suddenly surged to a gain of nearly 900 points in the late morning. The S&P 500, meanwhile, went from a loss of 4.7 per cent to a leap of 3.4 per cent, which would have been its biggest jump in years.

The sudden rise followed a false rumour that Trump was considering a 90-day pause on his tariffs, one that a White House account on X quickly labelled as “fake news.” That a rumour could move trillions of dollars’ worth of investments shows how much investors are hoping to see signs that Trump may let up on tariffs. Stocks quickly turned back down, and shortly afterward, Trump dug in further, saying he may raise tariffs more against China.

With AP, Bloomberg

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