Gold and Asian stocks were on the rebound on Tuesday as trade took a calmer tone after wild swings in metals markets and a deal to cut US tariffs on India helped the mood, while the Australian dollar rose after an interest rate hike.
Australia’s central bank joined Japan as the only developed-world economy to tighten policy, saying above-target inflation and a tight labour market justified a unanimous decision to lift the cash rate 25 basis points to 3.85 per cent.
Markets had mostly anticipated the move, though are now rushing to price in a follow-up in May, which was enough to push the Aussie about 1pc higher and over 70 US cents.
India’s rupee, and stocks cheered an announcement by US President Donald Trump that tariffs on Indian goods would be cut from 50pc to 18pc in return for New Delhi halting Russian oil purchases and lowering trade barriers.
Details, however, were scarce.
Elsewhere, Japan’s Nikkei jumped 4pc to recoup Monday’s losses, and South Korea’s KOSPI rose 5pc.
S&P 500 futures ESc1 were up 0.1pc with traders eyeing a busy few sessions of earnings.
With so many positions stopped out by collapses in crowded silver and gold bets, investors were taking stock and sitting back, according to Steven Leung, director of institutional sales at brokerage UOB Kay Hian in Hong Kong.
“It will take a long time for them to rebuild a bull or bear position…so they are staying away from the market,” he said.
Speculation that tax hikes on Chinese telcos could extend to internet giants dragged stocks such as Tencent and Alibaba down by more than 3pc.
Metals stabilise
Gold was up 3pc in Asia to $4,820 an ounce, a bounce of around 9pc from Monday’s lows. Silver traded 5pc higher to $83.34 an ounce.
Gold, silver, stocks, and the dollar have all whipsawed since Trump’s nomination of Kevin Warsh to lead the Federal Reserve sent metal prices tumbling. Warsh is seen shrinking the Fed’s balance sheet, pushing up bond yields, which is negative for precious metals that pay no income.
However, the dive in prices on Friday and on Monday went beyond fundamentals and was a wipeout for leveraged positions and sent tremors through global commodity and stock markets as traders sold other assets to bail out losing bets.
Looking ahead, Wall Street earnings are in the frame, with chipmaker AMD and server equipment company Super Micro Computer due to report after market.
Takaichi trade
Currency markets were finding a level after last week’s sharp spike lower in the dollar. The euro bought $1.1809 in the Asia session, off highs hit above $1.20 late in January.
The yen traded at 155.41 per dollar and has retraced about half the gains it made on the greenback that followed talk of possible joint US-Japan intervention to boost the yen.
Polls show Prime Minister Sanae Takaichi’s Liberal Democratic Party heading for a landslide victory at the weekend’s election – putting pressure on bonds and the yen as it would hand a mandate to her agenda for fiscal loosening.
Japanese Finance Minister Satsuki Katayama on Tuesday was downplaying weekend remarks from Takaichi highlighting the benefits of a weak yen, at odds with the authorities’ efforts to support it.
