De-escalation day
Markets reacted positively to signals that Donald Trump and his team are considering a strategic retreat on some policies, as least partly in an effort to soothe investors.
The market isn’t paying much attention to fundamentals right now, instead running on vibes, rhetoric and hearsay. And today, the vibes are marginally less catastrophic — despite the persistence of underlying problems in the US-led global economy that would have looked catastrophic to an investor back in November.
It’s appropriate, then, that the twin drivers of today’s muted euphoria (the ASX closed 1.3% higher after a 2.5% rise on Wall Street, with US futures as of now pointing to further gains tonight) are America’s most prominent market oscillators: Donald Trump and Elon Musk.
The US president overnight tamped down some of the most bearish reads on his sledgehammer approach to American economic revival with two moves. First, he signalled that he would not sack Jerome Powell, despite earlier bluster that he would turf the Fed chair over his intransigence on Trump’s preferred rate cut timeline. (Not that Trump could do so without a legal showdown — but investors appreciated the rhetorical ceasefire.)
Trump then reassured markets that the brutal 145% effective tariff rate on goods from China was not a permanent arrangement, and that they would find a much more reasonable — albeit non-zero — level at some point in the future.
