Asia share markets, dollar wary on tariff news
Asian share markets have made a wary start to the week as investors navigate the shifting sands of White House tariff policy, while awaiting key US jobs data and a widely expected cut in European interest rates.
There was little obvious reaction to President Donald Trump's threat late on Friday to double tariffs on imported steel and aluminium to 50 per cent, beginning on June 4, a sudden twist that drew the ire of European Union negotiators.
Speaking on Sunday, Treasury Secretary Scott Bessent said Trump would soon speak with Chinese President Xi Jinping to iron out a dispute over critical minerals.
White House officials continued to play down a court ruling that Trump had overstepped his authority by imposing across-the-board duties on imports from US trading partners.
"The court ruling will complicate the path ahead on trade policy, but there remains an ample set of provisions available to the administration to deliver its desired results," said Bruce Kasman, chief economist at JPMorgan.
"There is a commitment to maintaining a minimum US tariff rate of at least 10 per cent and imposing further sector tariff increases," he added.
"An increase in ASEAN to discourage transhipment looks likely, and the bias for higher tariffs on US-EU trade persists."
Markets will be particularly interested to see if Trump goes ahead with the 50 per cent tariff on Wednesday, or backs off as he has done so often before.
In the meantime, caution reigned and MSCI's broadest index of Asia-Pacific shares outside Japan went flat. Japan's Nikkei fell 1.1 per cent on Monday, while South Korean stocks dipped 0.1 per cent.
S&P 500 futures eased 0.2 per cent and Nasdaq futures lost 0.3 per cent. The S&P climbed 6.2 per cent in May, while the Nasdaq rallied 9.6 per cent on hopes final import levies will be far lower than the initial sky-high levels.
Front-running the tariffs has already caused wild swings in the economy, with a contraction in the first quarter likely turning into a jump this quarter as imports fall back.
The Atlanta Fed GDPNow estimate is running at an annualised 3.8 per cent, though analysts assume this will slow sharply in the second half of the year.
Data this week on US manufacturing and jobs will offer a timely reading on the pulse of activity, with payrolls seen rising 130,000 in May while unemployment stays at 4.2 per cent.
A rise in unemployment is one of the few developments that could get the Federal Reserve to start thinking of easing policy again, with investors having largely given up on a cut this month or next.
A move in September is seen at around a 75 per cent chance, though Fed officials have stopped well short of endorsing such pricing.
There are at least 11 Fed speakers on the diary for this week, led by Fed Chair Jerome Powell later on Monday.
Fed Governor Christopher Waller said on Sunday that cuts remain possible later this year as he saw downside risks to economic activity and employment and upside risks to inflation from the tariffs.
A softer jobs report would be a relief for the Treasury market, where 30-year yields continue to flirt with the five per cent barrier as investors demand a higher premium to offset the ever-expanding supply of debt.
The Senate this week will start considering a tax-and-spending bill that will add an estimated $US3.8 trillion ($A5.9 trillion) to the federal government's $US36.2 trillion ($A56.3 trillion) in debt.
Across the Atlantic, the European Central Bank is considered almost certain to cut its rates by a quarter point to 2.0 per cent on Thursday, while markets will be sensitive to guidance on the chance of another move as early as July.
The Bank of Canada meets Wednesday and markets imply a 76 per cent chance it will hold rates at 2.75 per cent, while sounding dovish on the future given the tariff-fuelled risk of recession there.
Widening rate spreads have so far offered only limited support to the US dollar.
"The greenback remains near the lower end of its post-2022 range and considerably weaker than interest rate differentials would imply," noted Jonas Goltermann, deputy chief markets economist at Capital Economics.
"Sentiment around the greenback remains negative and it continues to look vulnerable to further bad news on the fiscal and trade policy fronts."
On Monday, the dollar had dipped 0.2 per cent on the yen to $143.79 , while the euro edged up a fraction to $1.1353 .
The greenback also slipped 0.1 per cent on the Canadian dollar to $1.3727, getting no tailwind from Trump's threat of 50 per cent tariffs on Canadian steel exports.
In commodity markets, gold edged up 0.6 per cent to $US3310 ($A5,147) an ounce , having lost 1.9 per cent last week.
Oil prices bounced after OPEC+ decided to increase output in July by the same amount as it did in each of the prior two months, a relief to some who had feared an even bigger increase.
Brent rose $US1.07 ($A1.66) to $US63.85 ($A99.28) a barrel, while US crude gained $US1.18 ($A1.83) to $US61.95 ($A96.33) per barrel.
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But global trade and the economic outlook have been clouded by Trump's sweeping taxes on imports, the unpredictable way he's rolled them out and the threat of retaliation from other countries. Reversing decades of US policy in favour of freer world trade, Trump has levied 10 per cent tariffs on imports from almost every country. He's also threatened more import taxes, including a doubling of his tariffs on steel and aluminium to 50 per cent. Without mentioning Trump by name, OECD chief economist Álvaro Pereira wrote in a commentary to accompany the forecast that "we have seen a significant increase in trade barriers as well as in economic and trade policy uncertainty. This sharp rise in uncertainty has negatively impacted business and consumer confidence and is set to hold back trade and investment." China - the world's second-biggest economy - is forecast to see growth decelerate from five per cent last year to 4.7 per cent in 2025 and 4.3 per cent in 2026. 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US economic growth will slow to 1.6 per cent this year from 2.8 per cent last year as President Donald Trump's erratic trade wars disrupt global commerce, leaving businesses and consumers paralysed by uncertainty, the OECD says. The Organisation for Economic Cooperation and Development forecast the US economy - the world's largest - will slow further to just 1.5 per cent in 2026. Trump's policies have raised average US tariff rates from around 2.5 per cent to 15.4 per cent, the highest since 1938, according to the OECD. World economic growth will slow to just 2.9 per cent this year and stay there in 2026, according to the forecast. It marks a substantial deceleration from growth of 3.3 per cent global growth last year and 3.4 per cent in 2023. The world economy has proven remarkably resilient in recent years, continuing to expand steadily in the face of global shocks such as the COVID-19 pandemic and Russia's invasion of Ukraine. 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The Advertiser
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There are already questions about whether Tusk's fragile coalition can survive until the next scheduled parliamentary election at the end of 2027. The decision to call a confidence vote is apparently an attempt by Tusk to try to reassert authority in a shifting political situation where some of his coalition partners might be less likely to want to stick with him. Tusk oversees a coalition of several parties spanning an ideological divide, from left-wing progressives to centrists to agrarian conservatives. The divided coalition has failed to agree on some issues and the government has failed to fulfil some of Tusk's key promises, including a liberalisation of the restrictive abortion law. Nawrocki, who was supported by US President Donald Trump, won 50.89 per cent of votes in a tight race against Warsaw Mayor Rafał Trzaskowski, who received 49.11 per cent. The election revealed deep divisions in the nation along the eastern flank of NATO and the European Union. Nawrocki, who is set to take office on August 6, is expected to shape Poland's domestic and foreign policy in ways that could strain ties with Brussels while aligning the central European nation of nearly 38 million people more closely with the Trump administration. Trump welcomed his election, saying on his social media platform Truth Social: "Congratulations Poland, you picked a WINNER!" Nawrocki replied to Trump on X, saying: "Thank you, Mr President. Strong alliance with the USA, as well as partnership based on close co-operation are my top priorities." AP Poland's Prime Minister Donald Tusk says parliament will hold a confidence vote on his government on June 11. He called for the vote after his political ally, the liberal Warsaw mayor, lost Poland's presidential election to conservative Karol Nawrocki. "We are starting the session in a new political reality," Tusk said, at the start of a cabinet meeting in Warsaw. "The political reality is new, because we have a new president. But the constitution, our obligations and the expectations of citizens have not changed. In Poland, the government rules, which is a great obligation and honour." Tusk's government runs most of the day-to-day matters in Poland. It also exists separately from the presidency, but the president holds power to veto laws and influence foreign policy, and Nawrocki's win will make it extremely difficult for Tusk to press his pro-EU agenda. There are already questions about whether Tusk's fragile coalition can survive until the next scheduled parliamentary election at the end of 2027. The decision to call a confidence vote is apparently an attempt by Tusk to try to reassert authority in a shifting political situation where some of his coalition partners might be less likely to want to stick with him. Tusk oversees a coalition of several parties spanning an ideological divide, from left-wing progressives to centrists to agrarian conservatives. The divided coalition has failed to agree on some issues and the government has failed to fulfil some of Tusk's key promises, including a liberalisation of the restrictive abortion law. Nawrocki, who was supported by US President Donald Trump, won 50.89 per cent of votes in a tight race against Warsaw Mayor Rafał Trzaskowski, who received 49.11 per cent. The election revealed deep divisions in the nation along the eastern flank of NATO and the European Union. Nawrocki, who is set to take office on August 6, is expected to shape Poland's domestic and foreign policy in ways that could strain ties with Brussels while aligning the central European nation of nearly 38 million people more closely with the Trump administration. Trump welcomed his election, saying on his social media platform Truth Social: "Congratulations Poland, you picked a WINNER!" Nawrocki replied to Trump on X, saying: "Thank you, Mr President. Strong alliance with the USA, as well as partnership based on close co-operation are my top priorities." AP Poland's Prime Minister Donald Tusk says parliament will hold a confidence vote on his government on June 11. He called for the vote after his political ally, the liberal Warsaw mayor, lost Poland's presidential election to conservative Karol Nawrocki. "We are starting the session in a new political reality," Tusk said, at the start of a cabinet meeting in Warsaw. "The political reality is new, because we have a new president. But the constitution, our obligations and the expectations of citizens have not changed. In Poland, the government rules, which is a great obligation and honour." Tusk's government runs most of the day-to-day matters in Poland. It also exists separately from the presidency, but the president holds power to veto laws and influence foreign policy, and Nawrocki's win will make it extremely difficult for Tusk to press his pro-EU agenda. There are already questions about whether Tusk's fragile coalition can survive until the next scheduled parliamentary election at the end of 2027. The decision to call a confidence vote is apparently an attempt by Tusk to try to reassert authority in a shifting political situation where some of his coalition partners might be less likely to want to stick with him. Tusk oversees a coalition of several parties spanning an ideological divide, from left-wing progressives to centrists to agrarian conservatives. The divided coalition has failed to agree on some issues and the government has failed to fulfil some of Tusk's key promises, including a liberalisation of the restrictive abortion law. Nawrocki, who was supported by US President Donald Trump, won 50.89 per cent of votes in a tight race against Warsaw Mayor Rafał Trzaskowski, who received 49.11 per cent. The election revealed deep divisions in the nation along the eastern flank of NATO and the European Union. Nawrocki, who is set to take office on August 6, is expected to shape Poland's domestic and foreign policy in ways that could strain ties with Brussels while aligning the central European nation of nearly 38 million people more closely with the Trump administration. Trump welcomed his election, saying on his social media platform Truth Social: "Congratulations Poland, you picked a WINNER!" Nawrocki replied to Trump on X, saying: "Thank you, Mr President. Strong alliance with the USA, as well as partnership based on close co-operation are my top priorities." AP Poland's Prime Minister Donald Tusk says parliament will hold a confidence vote on his government on June 11. He called for the vote after his political ally, the liberal Warsaw mayor, lost Poland's presidential election to conservative Karol Nawrocki. "We are starting the session in a new political reality," Tusk said, at the start of a cabinet meeting in Warsaw. "The political reality is new, because we have a new president. But the constitution, our obligations and the expectations of citizens have not changed. In Poland, the government rules, which is a great obligation and honour." Tusk's government runs most of the day-to-day matters in Poland. It also exists separately from the presidency, but the president holds power to veto laws and influence foreign policy, and Nawrocki's win will make it extremely difficult for Tusk to press his pro-EU agenda. There are already questions about whether Tusk's fragile coalition can survive until the next scheduled parliamentary election at the end of 2027. The decision to call a confidence vote is apparently an attempt by Tusk to try to reassert authority in a shifting political situation where some of his coalition partners might be less likely to want to stick with him. Tusk oversees a coalition of several parties spanning an ideological divide, from left-wing progressives to centrists to agrarian conservatives. The divided coalition has failed to agree on some issues and the government has failed to fulfil some of Tusk's key promises, including a liberalisation of the restrictive abortion law. Nawrocki, who was supported by US President Donald Trump, won 50.89 per cent of votes in a tight race against Warsaw Mayor Rafał Trzaskowski, who received 49.11 per cent. The election revealed deep divisions in the nation along the eastern flank of NATO and the European Union. Nawrocki, who is set to take office on August 6, is expected to shape Poland's domestic and foreign policy in ways that could strain ties with Brussels while aligning the central European nation of nearly 38 million people more closely with the Trump administration. Trump welcomed his election, saying on his social media platform Truth Social: "Congratulations Poland, you picked a WINNER!" Nawrocki replied to Trump on X, saying: "Thank you, Mr President. Strong alliance with the USA, as well as partnership based on close co-operation are my top priorities." AP
News.com.au
2 hours ago
- News.com.au
‘Unusual' thing happening to the Aussie dollar in wake of Trump tariffs, says Reserve Bank
The global uncertainty sparked by US President Donald Trump's tariff agenda has resulted in something unusual happening to the Australian dollar. RBA assistant governor Sarah Hunter noted on Tuesday that the Aussie dollar has been behaving differently against the greenback than what we would historically expect. 'When the outlook for global growth weakens, the Australian dollar typically depreciates,' she explained in a speech at the Economic Society of Australia Business Lunch in Brisbane. This is because investors expect the Australian economy 'to be buffeted by the global headwinds and the RBA to respond with cuts to the cash rate'. The fact that the Australian dollar is a 'risk-sensitive' currency also contributes to the depreciation as 'when global investors are worried, they tend to focus on reducing risk exposure, moving their capital to low-risk assets in countries like the United States, Switzerland and Japan.' 'This means the Australian dollar tends to lose value against these currencies,' she said. When Trump announced his global 'Liberation Day' tariffs the Aussie dollar did as expected and fell, plummeting to below 60 US cents for the first time since the pandemic. However in recent weeks, the Aussie has recovered against the greenback and has been sitting between 64 and 65 US cents which, according to Dr Hunter, is 'more unusual' in a continuing time of uncertainty. Dr Hunter said this is in part due to a broad weakness in the USD after some global investors reduced their exposure to US assets. 'The weakness in the US dollar during a period of heightened risk is in contrast with many previous episodes,' she said, 'though it's too early to know whether this dynamic will continue.'
