Australian shares are set to hand back some of the previous day’s gains when trading resumes on Friday, continuing the yo-yo pattern of ups and downs this week.
The Australian Securities Exchange (ASX) futures market was flagging a 1.5% drop in the benchmark index at the opening, a lower slide than on Wall Street on Thursday (Friday AEST) which was underlined by continued worries about the escalating trade war.
At 8 am AEST (10 pm GMT Thursday) the S&P/ASX 200 index June share price index futures contract was trading 116 points (1.5%) lower at 7,622.
The Australian benchmark surged by 334.6 points or 4.5% to 7,709.6 on Thursday in its largest gain since March 2020 in the wake of United States President Donald Trump pausing reciprocal tariffs on more than 75 countries for 90 days.
But once investors in the U.S. had taken more time to reflect on Trump’s latest backflip they focused more on the negative economic impact of higher U.S. tariffs on Chinese imports, which he has raised to 145%.
In the wake of that, the Dow Jones Industrial Average lost 2.5%, the S&P 500 3.5% and the tech-heavy Nasdaq Composite 4.3%, setting a bearish backdrop for the resumption of trading on the ASX.
Burrell Stockbroking wealth adviser Adam Dight said valuing stocks was difficult because of volatile market conditions caused by Trump's tariff announcements and the responses from China and other countries.
“Everyone’s been educated over the years to expect some volatility but not to this degree,” Dight said.
“Markets are normally pricing nine months out. At the moment you can’t price nine days out.”
He said stocks trading on high price earnings multiples like Cochlear (ASX: COH) and others in the healthcare sector could come under selling pressure unless or until they demonstrate earnings growth that justifies their premiums.
In corporate news, investors will be looking for updates from AMP (ASX: AMP) at its annual general meeting today.
On fixed interest markets, the Australian Treasury bond yield curve continued to steepen, with the 10-year rate rising 0.12% to 4.332% and the two-year rate falling 0.58% to 3.268%.
