From a steep fall on Wednesday when top stocks such as JP Morgan Chase fell by 7%, Trump’s abrupt 90-day tariff delay saw America’s biggest bank rise by 8%, leaving the mid-week sellers wondering whether they had been misled.
The New York Times questioned what happened in a story headlined “Trump’s encouragement of stock investors draws scrutiny”.
Closer to home, the resources sector whipsawed at Trump’s command.
A near 10% one-day rise in the copper price best told the story of commodities because while it was welcome, the reality is that the latest price of around US$4.39 a pound only takes copper back to where it was five days ago.
Gold also moved up sharply with a rise back to US$3115 an ounce, a sign of the deep uncertainty which will dominate markets for the rest of the year, and perhaps for the next four years, under Trump and his tactics.
While Trump controls markets with his Tweets, and some people profit handsomely, the overall picture remains as foggy as ever, which is just the way he likes it, keeping everyone on the back foot.
Significantly for investors, some things did become a little clearer yesterday, including confirmation that Trump’s real target in his attempt to kick start manufacturing in America is China, with the latest threat of a 125% tariff on all Chinese goods landed in the U.S. effectively a declaration of economic war.
For day traders and speculators with a strong stomach the outlook is exciting. For genuine investors it is alarming, which is why gold, with its safe haven qualities, will continue to shine.
Macquarie Bank neatly described the challenge in the headline to research a note which previewed the upcoming quarterly reporting season for the resources sector: “Surfing in a hurricane”.
The obvious point in that snappy assessment of where markets are today is that no-one can be truly confident that what they see today will be valid tomorrow, especially as the Trump pause is said to be only for 90 days, a time frame which could easily change overnight.
Citi, a rival bank, had a more positive view in its attempt to see through the “tariff on, tariff off” game being played by Trump as if he was reliving the “wax on, wax off” scene from the movie Karate Kid.
Rather than panic and write down its price forecasts for the big miners ahead of their quarterly reports which start flowing next week, Citi made no change, sticking with $17.50 for Fortescue, which fell to $13.18 last week and is now back to $15.03 – perhaps heading up to Citi’s target price.
BHP and Rio Tinto were also seen by Citi as undergoing a short-term uncertainty relapse with BHP forecast to return to $45 after last week’s dip to $33.25 and Rio Tinto rising back to $130 after falling to $103.12.
Citi’s optimism that the share prices of the big miners will rebound can be applied across the market because China is unlikely to be intimidated by Trump’s tariff attack and will respond with its own economic stimulus measures to underwrite growth, as it has done during downturns in the past.
“China appears likely to ease (interest rates) further and, if necessary, lift infrastructure spending, providing a partial offset for iron ore,” Citi said.
Trump hitting the pause button with his tariff policy has been likened to the behaviour of a Mafia Don, first threatening, then soothing, in a process designed to make other countries align themselves with U.S. objectives.
But the real question as Trump’s game continues, which it will, is one of which country can sustain the pain longest, China or the U.S?
The answer to that question is clearly a win for China because it will be able to ride out the turmoil longer thanks to enforced government discipline, something the U.S. can never do.
For Trump and the U.S. economy, an awful reality might soon dawn. That the major victim of the tariff games is the U.S. itself which has become a heavily indebted and unreliable trade partner, whereas China, quite remarkably, is now seen as a safe business address with vast savings to ride out the storm.
Overall, the Australian stock market’s big bounce yesterday looked good on paper but like copper, it only took prices back to where they were a week ago.
The metal and mining index, which is dominated by the majors, rose by 6% yesterday but was still down 4% over the week.
The gold index, unsurprisingly, outperformed everything, up 4% yesterday, taking its rise for the month to 12%, and for the year to 33%.
Northern Star, despite its size, was one of the top performers with a rise yesterday of 76c to $19.93, taking its one week gain to $1.38 (7%), lifting the company’s stock market value to $23 billion and raising a question about whether it is being stalked by a global gold major.
The outperformance of Northern Star is significant when compared with the relatively sluggish 9c (1%) gain by Evolution Mining which traded at $7.06.
Other gold moves of interest included:
- Cavalier Resources, up 11c (64%) to $28c after releasing a revised pre-feasibility study for its Crawford project near Leonora in WA.
- Spartan Resources, up 8c (4%) to $1.97 after an upbeat presentation at the Gather Round conference in Adelaide of Resources Rising Stars (RRS).
- Genesis Minerals, up 15c to $3.81 after releasing a strong reserve report.
- Regis Resources, up 24c to $4.27 with Morgans updating its research with a buy tip and price target of $4.65.
Rare earth stocks, which had reacted positively to news that China is tightening export rules, lost ground as doubts grow about overall global growth. Lynas, the local rare earths leader, slipped 24c to $7.80, while Hastings traded down by 1.5c to 29c.
Other news and market moves of intertest this week included:
- Boss Energy led a stronger uranium sector on news of increasing production at its Honeymoon and Alta projects, rising by 37c to $2.58. Deep Yellow crept 2c higher to 91c, while Terra Uranium slipped 1c lower to 3.1c after reporting that it had dropped a plan to buy the Amer Lake project in Canada.
- Sandfire, which is positioned to benefit from Trump’s preference for U.S. supplied raw materials reclaimed 52c of lost ground to trade at $9.41.
- Sky Metals received a boost after its RRS presentation and by reporting high grade tin assays from its Tallebung project in NSW, rising by a 0.2c to 4.5c.
- Sunrise Energy rose by 2c to 28c after making made a return to the news pages with a report of high-grade scandium assays while re-sampling material at its Syerston project in NSW, and
- Champion Iron rose by 45c (11%) yesterday to $4.39 but was still down 4.5c over the week even as Jarden analysts tipped it as a buy with a price target of $7.02.
