US-China Tariffs Impact: Market Optimism, Gold Rally, and Key Trading Insights

The fact that gold continues to trade so well, with both spot gold and front-month futures rallying to new highs highlights that while momentum is perpetuating the upside many remain of the view that it is prudent to also run gold longs and to increase one’s exposure to US Treasuries as a hedge to mitigate the chance that tariffs could still cause increased and more prolonged anxiety.

We’ve also seen traders reducing USD longs across the board through the session - catalysed by the lower-than-expected JOLTS job openings report (at 7.6m). We see the DXY sitting at session lows and testing 108.00, although the larger percentage moves on the day have been seen in the CLP, NOK and SEK.

European equity indices recorded a huge January, seeing arguably the best risk-adjusted returns across asset classes and there are signs that outperformance may kick back into gear. The GER40 (DAX) was recently my preferred index of choice on the long side, but I am seeing the EU Stoxx 50 and SPA35 as my current preferred long expressions here, with the price action and the technical set-up suggesting a probability that both could kick to new highs in the near-term.

Earnings continue to roll in from EU corporates and they have largely been well received – Infineon certainly kicked onto the radar with a result that has delivered the goods, with the share price closing +10.4% and threatening to break out to the best levels since July 2024. Perhaps some of the sentiment from Infineon's earnings have spilt over into the US semis and global high momentum plays, with Meta, Googl, IBM, and Amazon all breaking out to new highs. While not at ATHs, ARM, BABA and Atlassian all look strong, and I like these names further higher in the near term.

Googl clearly gets the attention from here, as does AMD, with earnings due shortly after the close. With the options pricing a -/+6.2% move in Googl on earnings, and the stock at ATHs, I guess some caution is warranted – but the market obviously likes the story, and we’ll see if the outlook and guidance alter that in any way. US equity futures have seen a solid turnaround from the initial sell-off seen on the US-China tariffs news flow that impacted the tail end of Asia cash trade yesterday. NAS100 futures sit close to 2% off the lows and look set to push to the top of the 22000 to 20,700 range it has held since December. With the S&P500 cash index currently sitting at 6038 and close to session highs, the bulls are attempting to take back control, and while breadth is fairly poor (51% of S&P500 companies are higher on the day) the sector outperformance comes from tech and Communication Services, with Energy the place to be – backed by a 3.3% intraday spike higher in crude on headlines that Trump is pushing through orders to inflict “Maximum economic pressure” on Iran.

We turn to the Asian session ahead, and as we look towards what will be a positive open across the major bourses, the focus turns to the re-open of China’s equity market and the PBoC’s CNY fixing (at 12:15 AEDT), where the widely held view is that the PBoC will keep CNY stable through trade. Headline tariff risk remains a threat, and this needs to be considered in one’s approach to managing intraday risk, although, it’s unclear when Xi and Trump are indeed due to speak.

By way of known risk – the data comes in light through Asia, with NZ employment and Japan real wages the only real considerations. We get PMIs (revision) in Europe and the UK, while ADP payrolls and ISM services are due out in the US, with the latter the possible market mover.

Good luck to all