Relief rally as tariff optimism lifts ASX

Investors latch onto hopes of a thawing in US trade tensions, even as President Donald Trump injects fresh uncertainty into the path ahead. Analysts say the gold rally has further to run.

A day of calm in share markets came after analysts upped their forecasts for the surging gold price.

Investors latched on to hopes of a thawing in tensions between the US and its trading partners, pushing the Australian sharemarket higher, even as US President Donald Trump injected fresh uncertainty into the path ahead.

The S&P/ASX 200 index gained 1.3 per cent to 7748.60 points on Monday, with nearly all sectors in the green. Technology and materials stocks led the gains, jumping more than 2 per cent apiece, while financials and property companies each rose more than 1 per cent.

The positive result in local equities was replicated elsewhere, with shares tracking higher across Asian markets including Hong Kong, up more than 2 per cent, as well as Tokyo, Shanghai and Seoul.

Monday’s calm followed the rollercoaster ride that saw violent moves in markets around the globe last week as investors grappled with the biggest sell-off since the depths of the Covid-19 crisis, with trillions of dollars wiped off the value of sharemarkets.

A healthy lead from Wall Street – the S&P 500, Dow and Nasdaq all gained more than 1.5 per cent on Friday – set the tone for a positive start to the trading week, even as the US President introduced fresh confusion into trade tensions as he warned exemptions for technology goods would be short-lived.

The US administration on Friday announced exemptions for a range of consumer tech goods from its reciprocal tariffs, including smartphones, laptops, semiconductors and other electronic products. The move was hailed a win for US tech megastocks and a hopeful sign for trade negotiations with China. But by Sunday, President Trump was out swinging once again, warning the exemptions would be temporary.

“Nobody is getting ‘off the hook’ … especially not China which, by far, treats us the worst!” Trump posted on his Truth Social platform.

Analysts and fund managers chose to look through the latest blast from the US President, with a sense that markets may have already gone through the worst of the trade war volatility.

“At this point, markets are no longer reacting to the (tariff) number. Is it 100 per cent? 125 per cent? Markets are no longer responding to that because it seems like it’s all just part of a negotiation,” TenCap founder and portfolio manager Jun Bei Liu told The Australian.

“It certainly looks like the share market has seen its bottom, given what we know at this stage. And the US Fed has stepped out and said they would give support should there be any further deterioration … the sharemarket looks reasonably positive now,” she said.

US President Donald Trump speaks to reporters aboard Air Force One. Picture: Mandel Ngan/AFP

Among the names she sees as looking reasonably priced following the recent sell-off are Pro Medicus, REA, Fisher & Paykel and Cochlear.

Cochlear jumped 4.1 per cent during Monday’s trade, while Pro Medicus gained 5 per cent.

Local tech names that rose through Monday’s session included large-cap WiseTech, up 3 per cent to $86.74 and accounting software firm Xero, up 2.3 per cent to $158.67.

Among the mining heavyweights, BHP jumped 2.7 per cent to $36.37, while Rio Tinto rose 1.4 per cent to $110.85.

In financials, CBA leapt 1.7 per cent to $157.29, NAB was up 0.9 per cent at $33.55, Westpac gained 1.6 per cent to $30.51 and ANZ was 1.7 per cent higher at $27.42.

Sebastian Mullins, head of multi-asset and fixed income at Schroders, said Monday’s relief rally showed investors are hopeful US tariffs may not be as bad as originally feared.

“Everyone was waiting for the higher tariffs to come through, and now Trump is showing signs of wiggle room and relaxing those tariffs. So moving to a less-worse outcome has given the market a bit of a boost,” he said.

The big risk now is how long it takes the US to negotiate the true tariffs with its trading partners, he said.

“The longer it takes, the more likely consumers and corporates stop spending and the higher the probability of a recession,” Mr Mullins warned.

Investors are mixed on their positioning even amid tariff hopes. TenCap’s Ms Liu says she has taken off some of the short positions the fund put in place weeks ago, while Mr Mullins says Schroders has been buying up gold, among other defensives.

“US bonds haven’t been doing their job. At Schroders, we’ve been hiding out in the front end of US curves (futures), and also diversifying to Australia and Germany, which has helped on the margin. Gold has also been a good hedge through this volatility,” Mr Mullins said.

Monday’s sharemarket trade provided a break from the big swings of recent sessions, but forecasts for the gold price to push even higher — it hit a record $US3245 on Friday — show investors expect further volatility and uncertainty.

UBS on Friday lifted its 2026 average gold price by $US600 to $US3500 an ounce. Goldman Sachs, meanwhile, sees gold touching $US3700 by year’s end.

“The case for adding gold allocations has become more compelling than ever in this environment of escalating tariff uncertainty, weaker growth, higher inflation and lingering geopolitical risks,” UBS strategist Joni Teves said.

“The current backdrop wherein global trade, economic and geopolitical relationships may be changing reinforces the need to diversify into safer havens like gold. We expect gold’s rally to extend into next year and for prices to stabilise at higher levels further out.”

Originally published as Relief rally as tariff optimism lifts ASX