ASX rises as deal averts trade war fears; WiseTech appoints new CEO

Welcome to your five-minute recap of the trading day.

The numbers

The benchmark S&P/ASX 200 index on Monday closed up 30.8 points, or 0.4 per cent, to 8697.7, while the broader All Ordinaries rose 29.2 points, or 0.3 per cent, to 8963.5. Eight of the 11 sectors ended the session in the green.

The Australian dollar dropped to a one-week low against its American counterpart, buying US65.52¢, from US65.81¢ at 5pm on Friday.

Wall Street is hitting fresh all-time highs.Credit: Bloomberg

The lifters

Financials was the strongest sector, up 0.9 per cent, with Magellan the best performer, rising 4.6 per cent. The big four banks climbed, with Commonwealth Bank leading the way with a 1.2 per cent gain. NAB was up 0.7 per cent, ANZ 0.3 per cent while Westpac advanced 0.5 per cent.

Among the tech stocks, Life360 added 1.9 per cent, TechnologyOne rose 1.2 per cent and Xero was 0.4 per cent higher. Logistics software maker WiseTech Global’s shares were up 0.3 per cent after it appointed Zubin Appoo as its first permanent CEO since the resignation of long-time leader Richard White, who quit last year amid a media storm.

Appoo was serving as chief of staff and has been with the company for about 15 years.

White, who is one of Australia’s wealthiest people, resigned as WiseTech chief executive last October following an investigation by The Sydney Morning Herald, The Age and The Australian Financial Review. He remains at WiseTech as its executive chair.

CSL shares gained 1 per cent, boosting the healthcare sector (up 0.8 per cent), while Sigma and Cochlear added 1.3 per cent apiece.

The laggards

The miners have been hit by a slide in iron ore prices, with Rio Tinto losing 1.6 per cent, BHP shedding 1.2 per cent and Fortescue falling 1.1 per cent.

Energy stocks gave up some ground after making a strong start to the session. Woodside and Santos each ended the day 0.4 per cent lower. Yancoal fell 2.2 per cent, Ampol lost 0.9 per cent while Whitehaven Coal slipped 4.2 per cent.

Boss Energy plunged 44 per cent to a more than three-year low of $1.99 after the uranium producer flagged higher costs and other challenges at its Honeywell uranium mine in South Australia, which resumed production last year. Other uranium companies finished lower as well, with Deep Yellow falling 8.4 per cent and Paladin dropping 4.4 per cent.

The lowdown

The Australian sharemarket has started the week on a positive note after the United States struck a framework trade deal with the European Union, averting a spiralling battle between two allies, which account for almost a third of global trade.

Market sentiment was boosted by the deal announcement on Monday morning (AEST), which came after European Commission President Ursula von der Leyen travelled for talks with Donald Trump at his golf course in western Scotland to push a hard-fought deal over the line. The deal will impose a 15 per cent US import tariff on most EU goods.

“I think this is the biggest deal ever made,” Trump told reporters after an hour-long meeting with von der Leyen, who said the 15 per cent tariff applied “across the board”.

“We have a trade deal between the two largest economies in the world, and it’s a big deal. It’s a huge deal. It will bring stability. It will bring predictability,” she said.

The deal, that also includes $US600 billion ($914 billion) of EU investments in the United States and significant EU purchases of US energy and military equipment, will bring clarity for EU companies.

However, the baseline tariff of 15 per cent will be seen by many in Europe as a poor outcome compared to the initial European ambition of a zero-for-zero tariff deal, although it is better than the threatened 30 per cent rate.

The deal mirrors parts of the framework agreement the United States clinched with Japan last week.

“Putting it all together, what we’ve seen with Japan, with the EU, with the talks which are due to be held in Stockholm between the US and China, it really does negate the risk of a prolonged trade war,” said Tony Sycamore, market analyst at IG.

“The importance of the August tariff deadline has significantly been diffused.”

The details remained vague and nebulous, however.

Investors were also watching for this week’s Federal Reserve meeting.

Despite Trump’s threats, a rate cut is seen as unlikely, with the futures market giving it just 3 per cent implied odds.

ANZ’s research team said it would be looking at any tweaks to the language of the rate-setting Federal Open Market Committee statement, as well as comments from Fed chair Jerome Powell that might signal the September meeting is “live” for a rate cut.

The Australian Bureau of Statistics on Wednesday will release a second-quarter consumer price index readout that could determine whether the Reserve Bank cuts rates in August.

“At this point, a rate cut in August feels almost nailed on, but this week’s data will need to reinforce the case that inflation is under control,” eToro market analyst Josh Gilbert said.

Trump again on Thursday lobbied the Fed to cut rates, which he has implied could save the US government money on debt repayments.

Powell has continued to insist he wants to wait for more data about how Trump’s tariffs affect the economy and inflation before the Fed makes its next move. Lower interest rates can help goose the economy, but they can also give inflation more fuel.

Lower rates also may not lower the US government’s costs to borrow money, if the bond market feels they could send inflation higher in the future. In that case, lower short-term rates brought by the Fed could actually have the opposite effect and make it more expensive for Washington to borrow money over the long term.

The widespread expectation on Wall Street is that the Fed will wait until September to resume cutting interest rates.

In the bond market, Treasury yields held relatively steady following Trump’s latest attempt to push Powell to cut interest rates. Trump also seemed to back off on threats to fire the Fed’s chair.

“To do that is a big move, and I don’t think that’s necessary,” Trump said. “I just want to see one thing happen, very simple: interest rates come down.”

If Trump fired Powell, he’d risk a freak-out in financial markets by raising the possibility of a less independent Fed, one unable to make unpopular choices necessary to keep the economy healthy.

The yield on the 10-year Treasury eased to 4.38 per cent from 4.43 per cent late Thursday. The two-year Treasury yield, which more closely tracks expectations for what the Fed will do, held steady at 3.91 per cent, where it was late Thursday.

With AAP, AP, Reuters

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