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 U.S. 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%.
Make sense of global markets with the Trading Day newsletter. Sign up here.
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 1% higher and over 70 U.S. cents.
India’s rupee and stocks (.NSEI), opens a new tab cheered an announcement by U.S. President Donald Trump that tariffs on Indian goods would be cut from 50% to 18% in return for New Delhi halting Russian oil purchases and lowering trade barriers.
Elsewhere, Japan’s Nikkei (.N225), opens new tab jumped 4% to recoup Monday’s losses, and South Korea’s KOSPI (.KS11), opens new tab rose 5%.
S&P 500 futures were up 0.1% 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 (0700.HK) and Alibaba (9988.HK) down by more than 3%.
Gold was up 3% in Asia to $4,820 an ounce, a bounce of around 9% from Monday’s lows. Silver traded 5% 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.
While the indexes were lifted by gains in chipmakers, small caps also performed well, with the Russell 2000 jumping about 1%.
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 (AMD.O), opens new tab and server equipment company Super Micro Computer (SMCI.O), opens new tab due to report after market.
TAKAICHI TRADE
