The US President, Donald Trump, has retreated from his threat to impose tariffs on European allies, a move that has fuelled a rally in global share markets and boosted Australian stocks.
The de-escalation of trade tensions has sent the benchmark S&P/ASX 200 index briefly above the 8,860-point mark, recouping some of its recent losses. Veteran financial markets commentator Michael McCarthy from online trading platform Moomoo said the latest easing of geopolitical tensions has been met with a shrug by investors, who have grown accustomed to the “Trump Always Chickens Out” (TACO) trade strategy.
Trump had been pressuring European countries as part of his campaign to gain control of Greenland, but the president has now said he has a “framework of a future deal” on the territory, without providing further details. However, a member of the Danish parliament, Sascha Faxe, has suggested that the deal Trump claims to have struck with NATO over Greenland is “not real”.
“The thing is, there can’t be a deal without having Greenland as part of the negotiations, first of all,” Faxe said in an interview with Sky News on Wednesday.
The easing of geopolitical tensions has provided a boost for Australia’s commodity-heavy share market, which has been supported by robust prices for iron ore, gold, and copper. However, sticky inflation and the growing prospect of a near-term interest rate hike have limited stock market gains.
Chris Weston, the head of research at Melbourne-based financial firm Pepperstone, said investors will want to see more details on Trump’s framework deal over Greenland’s future before completely discounting further risk in Europe.
“That said, it may not be entirely straightforward – many will want to see the devil in the detail of the deal and the finer details of any agreement, what is truly at stake, and how the deal is articulated from the European side,” Weston said.
The Australian dollar has also hit a 15-month high against its US equivalent, trading near the US68c mark, as the market sentiment improves.
