26 May 2025

US MARKET

US markets were closed on Monday for the Memorial Day holiday but the Futures market remains open and the newsflow, particularly in this environment, doesn’t stop.   

European stocks climbed along with US equity futures after President Donald Trump extended a deadline on aggressive euro area tariffs, reinforcing a pattern of leaving markets guessing by making trade threats before backtracking. The Stoxx Europe 600 index erased Friday’s losses sparked by Trump’s threat of 50% tariffs on the European Union. The US President later said he had agreed to delay the date for the levies to July 9 from June 1. Contracts for the S&P 500 and the Nasdaq 100 advanced more than 1%. A gauge of the dollar hovered near its lowest level in almost two years. Cash Treasuries didn’t trade due to holidays in the UK and US.  

The tariff war has returned as the major driver once again after concerns about Trump’s proposed tax cuts, and their impact on the US deficit, churned markets much of last week. Trump’s whiplash moves have increased uncertainty in markets and his broadside against Europe on Friday, followed by a backtrack, was a stark reminder of the president’s volatile policy making. Call it the ‘Trump Pattern’, and which is increasingly seen as a successful strategy for risk-tolerant investors. That said, the fact is that the rebounds that follow these selloffs are losing strength as we go on. Investor fatigue.  

 European Commission President Ursula von der Leyen stated Europe is ready to advance talks swiftly and decisively,” but “a good deal” will need “time until July 9.” That’s the date on which Trump’s 90-day pause of his so-called reciprocal tariffs had originally been set to end.  

The trade tensions and weak demand for US assets are showing up in the dollar. Bloomberg’s dollar spot index was track for its lowest close since July 2023, while the greenback is at or approaching key levels against a host of currencies including the euro, British pound, yen and Swiss franc. Enthusiasm has faded for the world’s reserve currency this year. Speculative traders remained bearish on the dollar but trimmed their short positioning to $12.4 billion in the week ending May 20 from $16.5 billion in the week prior, according to CFTC data reported Friday. 

A key event this week will be Nvidia Corp.’s results on Wednesday. The chip-making giant is seen as a bellwether for so called growth stocks and the sustainability of the artificial intelligence boom. Its outlook will be crucial given macro risks and tariff uncertainty. 

Investors are also gearing up for the Federal Reserve’s preferred inflation measure, the US personal consumption expenditures (Core PCE) price index excluding food and energy, which will be released Friday. The April reading is forecast to rise 0.1% based on consensus expectations. 

To keep it really simple, in this environment: What are the Bulls Saying? They’re saying, look, earnings growth this quarter, 13% compared to the same quarter last year, and the Fed is still interested in cutting rates, so it’s okay. And what are the Bears Saying? High valuations and coupled with rising yields that

OVERVIEW OF THE AUSTRALIAN MARKET

Australian shares dipped at lunchtime as news that American President Donald Trump had delayed a sweeping 50% tariff on EU imports did little to settle the cautious mood among traders. The S&P/ASX 200 Index slipped 0.1% – by just 10.4 points – near 1pm after swinging between gains and losses. Six of 11 sectors were in the green, with technology leading gains. The All Ordinaries also slipped 0.1%.

The American president had suggested late last week that the steeper tax could take effect this week, sending the Nasdaq plunging 1% and the US dollar to its lowest level since 2023 against a basket of currencies.

In Australia, shares traded in a narrow range in a cautious start to the week. WiseTech was an exception, up more than 5.7% after the technology giant announced its largest acquisition: Texas-based e2open for $3.25 billion.

Westpac and Commonwealth Bank have agreed to keep Healthscope’s 37 private hospitals operating even as lenders call in receivers to take control of the company. The country’s second-largest private hospital operator said CBA would contribute $100 million in new funding to keep the medical facilities open. Westpac has separately agreed to provide working capital to allow receivers to sell the business. A syndicate of banks and hedge funds that control Healthscope’s $1.6 billion in debt voted on Monday to put the company into receivership after being handed control by its previous owner, Canadian asset management giant Brookfield, earlier this month.

Uranium stocks extended Friday’s rally after Trump signed an executive order intended to jumpstart the US’ nuclear energy industry. Boss Energy leapt 9.3% and Deep Yellow by 17.3%. Paladin Energy was up 14.2%.

Gains were offset by losses from utilities as Origin Energy dropped 4.5%. That was after the company told investors that earnings from its stakes in Australia Pacific LNG and Octopus Energy would be lower than expected.

A gauge of the dollar slid toward its lowest level in nearly two years after US President Donald Trump’s decision to postpone higher tariffs on the European Union boosted other currencies with strong links to global trade. The Bloomberg Dollar Spot Index fell as much as 0.4 per cent on Monday and is headed toward a level unseen since July 2023. Currencies including the Australian and New Zealand dollars as well as the euro surged after Trump said he would extend the deadline for the EU to face 50% tariffs until July 9.

Finally, Citi has raised its short-term target for gold prices to $US3500 an ounce after US President Donald Trump’s threat to impose higher tariffs on EU imports prompted a spike in demand for the precious metal. Citi analysts said they expect prices to consolidate between $US3100 and $US3500 over the next few months “as the world digests US tariff policy changes, as geopolitical risks remain high, and as US budget and growth concerns remain elevated”.