Morning Wrap: ASX 200 to surge, S&P 500 records third best session on record, Trump pauses most tariffs

ASX 200 futures are up 490pts (+6.61%) as of 8:30 am AEST.

In a nutshell: 

• That is not a typo, the ASX 200 is set to surge on Thursday after Trump announced a 90-day pause on most countries, except China

• S&P 500 recorded its third best session on record, trailing the bounces it experienced during the Global Financial Crisis

• Sectors that bounced the most include semiconductors (and tech more broadly speaking), copper and lithium, uranium and airlines

Let's dive in.

S&P 500 SESSION CHART

S&P 500 surged to close at best levels (Source: TradingView)

OVERNIGHT MARKETS

• US stocks surged after Trump’s decision to pause reciprocal tariffs on most countries except China

• S&P 500 snapped a four-day losing streak, posted its best session since October 2008 and third best session on record

• Broad surge in pretty much everything, from Copper (+8.5%) to Bitcoin (+9.5%)

• Levered ETFs set to buy over US$30bn worth of stocks after overnight surge, this will mark the biggest buying spree on record (BBG)

• Chinese stocks rose for a second day amid speculation that authorities will introduce stimulus to counter US tariffs (BBG)

• Taiwan activates $15bn stock stabilization fund after index fell further into bear market (Reuters)

SEQUENCE OF EVENTS

• On Wednesday, the US 10-year yield briefly surged to 4.5%, marking a ~50 bp rally in the last three days/since ‘Liberation Day’. This implies higher interest rates, which is not what the Trump administration wants 

• On Wednesday night, China announced it would raise tariffs on US goods from 34% to 84%, matching the additional 50% imposed by Trump

• During this time, Nasdaq futures briefly dipped 1.5% but rallied back up to breakeven

• Major US benchmarks opened around breakeven despite China’s retaliatory tariffs and proposed tariffs from the EU

• Shortly after session open, Trump posted on social media “This is a great time to buy!”

• Around the half-way mark, Trump authorised a pause for everyone but hiked tariffs on China to 125%, up from prior 104%

• “I have authorised a 90 day pause, and a substantially lowered reciprocal tariff during this period, of 10%, also effective immediately.”

• The announcement was a little vague – Does this imply tariffs are paused for 90-days or a 90-day reduction to 10%

• Within ~15 minutes, the S&P 500 rallied ~6%

• The upside is likely exacerbated by oversold technicals (e.g. less than 100 S&P 500 stocks were trading above their 200-day moving averages) and sentiment (AAII sentiment, CNN Fear & Greed etc. all at extremely bearish levels)

• There is still some skepticism about a sustained bounce due to ramp in US-China trade tensions, elevated bond yields and decision to keep 10% universal tariffs in place

STOCKS

• First quarter 2025 earnings start on Friday, with JPMorgan, Wells Fargo and Morgan Stanley due to report 

• Delta first quarter EPS beat by more than 20% but guidance pointed to flat revenue growth, while EPS missed by 9.5% as “growth has largely stalled” due to broad economic uncertainty surrounding global trade (WSJ)

• Peabody Energy reviewing US$3.7bn deal to buy Anglo American steel-making coal business (BBG)

• Volkswagen reports slight increase in first quarter vehicle deliveries, benefiting from Tesla weakness in Europe (BBG)

CENTRAL BANKS

• SF Fed's Daly says policy in good place to stay modestly restrictive (BBG)

• ECB primed for accelerated rate-cut path as Trump tariffs threaten recession (RT)

• New Zealand cuts rates by 25 bp, sees scope for further easing amid tariff headwinds (BBG)

• India cuts rates by 25 bp, adopts dovish bias amid tariff-related headwinds (BBG)

TRADE WAR

• EU member states voted in favour to introduce 25% tariff on US steel and aluminium imports also US$23bn of US goods targeting range of products including orange juice, soybeans and tobacco – “can be suspended at any time, should the US agree to fair and balanced negotiated outcome” (BBG)

• Trump optimistic after call about tariffs with South Korea, "we have the confines and probability of a great deal for both countries," he said (RT)

• ‘We are all waiting for a reply.’ Countries say White House hasn’t responded on tariff talks (PLT)

• Trump will announce tariffs on pharmaceutical drugs soon (BBG)

• Clothing brands forced to absorb tariff cost or hike prices by 40%, driving businesses freeze hiring, cut sales forecasts (RT)

• US tariffs cause car import pile-up at American ports (FT)

• South Korea unveils US$2bn in aid for tariff-hit auto sector (BBG)

ASX TODAY

• BigTinCan takeover by Vector Capital becomes legally effective, shares suspended close of trading today (BTH)

• Galan Lithium considering $35m capital raise after rejecting takeover offer from China’s Zhejiang Huayou Cobalt (AFR)

• MinRes considering sale of Wodgina and potential equity raise to improve balance sheet (The Aus)

WHAT TO WATCH TODAY

• The everything rally: Get ready for the most epic one-day rally that may very well surpass the 5-6% bounces we saw during Covid. The big risk on move drove flows back into growth-y pockets of the market. The best performing sectors on the S&P 500 were Tech (+14.1%) and Discretionary (+11.3%) while Staples (+4.2%) and Utilities (+3.9%) underperformed on a relative basis. Commodities like Copper (+8.5%) and Brent (+6.6%) also rallied hard.

• Gap up and then what: With such a strong lead from Wall Street, it's very likely that most stocks will experience a massive gap up at the open. The question is – will these stocks catch a bid? Will a 5-6% gather momentum to close 7-8% higher? Or will it just chop sideways?

• Watch the shorts: Watch out for the most heavily shorted names like Boss Energy (24.98% short interest), Paladin (15.79%), Deep Yellow (13.36%) and Pilbara Minerals (13.07%). Such a face-ripping rally may very well drive some extra upside for heavily shorted names

• A final note: You never see the Index experience such a move during a bull market. The market's best and worst sessions always occur amid a bear. The two world's largest economies are still going tit-for-tat, while 10% reciprocal tariffs are still in place for everyone else. We'll get a massive rally today, but let's see how the dust settles.

BROKER MOVES

• Data#3 upgraded to Buy from Neutral; target remains $8.10 (UBS)

• JB Hi-Fi upgraded to Buy from Hold; target remains $99 (BP)

• Insurance Australia upgraded to Buy from Neutral but target cut to $8.30 from $8.50 (UBS)

• Sandfire Resources upgraded to Outperform from Neutral; target remains $10.80 (MQG)

Stocks trading ex-dividend: 

• Thu 10 Apr: Cadence Capital (CDM) – $0.03, Cadence Opportunities Fund (CDO) – $0.065, Cosol (COS) – $0.01

• Fri 11 Apr: WAM Leaders (WLE) – $0.047

Other ASX corporate actions today: 

• Dividends paid: Cleanaway Waste (CWY), NWH Holdings (NWH), Brambles (BXB), SGH (SGH), Qube (QUB)

• Listing: None 

• Earnings: None

• AGMs: Santos (STO)

Economic calendar (AEST):

• 11:30 am: China Inflation and PPI (MAR)

• 10:30 pm: US Inflation (MAR)