Tariff flip-flop delivers surprise turn in events: What’s now for Nasdaq, Asian indices, gold

Tariff flip-flop delivers surprise turn in events

In a single night, market sentiments has swung dramatically—from fear, uncertainty, and doubt to relief and euphoria. This sharp shift was triggered by yet another policy reversal from US President Donald Trump, who unexpectedly announced a 90-day pause on the implementation of higher tariffs for certain countries. While a universal "reciprocal tariff reduction to 10%" remains in place, the move is still seen as a much more favourable outcome than initially feared, helping to push back against earlier concerns that securing such a concession would be a far more arduous process.

One may note that this is eventually still a temporary reprieve rather than a full rollback of tariffs. Sector-specific tariffs—potentially affecting industries such as pharmaceuticals, semiconductors, and lumber—are still expected to be announced in due course. But at least for now, the immediate risk of a recession may be revisited—likely lowered at least for now.

Tensions with China, however, remain elevated. The US has raised tariffs on Chinese goods to 125% in response to Beijing’s earlier hike—which saw duties on all US imports rise to 84%, up from the previously declared 34%. The spillover effects of this continued tit-for-tat US-China trade conflict cannot be undermined, but the path to negotiation is not entirely closed. President Trump previously maintained confidence that Chinese President Xi Jinping will eventually return to the negotiating table and market participants are likely to harbour such hopes unless proven otherwise.

What’s now for the Nasdaq?

This turn of events underscores the unpredictability of US President Donald Trump. The Nasdaq surged 12.2%, the S&P 500 gained 9.5%, and the Dow Jones Industrial Average (DJIA) rose 7.9%—with the sharp unwinding of extreme bearish sentiment likely amplifying the magnitude of the rally. All sectors closed in the green, with growth sectors leading the outperformance, having borne the brunt of the prior market sell-off.

From a technical standpoint, the overnight rally has pushed the Nasdaq close to a key downward trendline resistance near the 19,500 level. Despite the rebound, the broader lower-highs-lower-lows structure still remains intact, which will inevitably raise the question of whether this is merely a bear market rally. With the recent change in narrative, all eyes will be on whether this relief bounce has room to evolve into something more sustained, potentially with the formation of a higher low on any pullback.

For now, the weekly relative strength index (RSI) has also headed back closer to the midline, suggesting a more neutral momentum setup for now. A reversion back above the midline may offer greater conviction of a trend shift, which were presented in the 2018, 2020 and 2022 bear markets.

What’s now for Asian markets?

The Asia session looks set to open on a strong note, with the Nikkei up 8.3%, the ASX gaining 5.0%, and the KOSPI rising 4.9%, though simmering US-China tensions could serve as a limiting factor, given the secondary impact of US-China’s tit-for-tat actions on the region’s economies. There will likely be a lot of anticipation for how China may respond next, having been singled out for its unwillingness to conform, and having its US tariffs being raised to 125%. A continued gridlock seems to appear more likely than a rollback in tariffs, suggesting that while near-term optimism may prevail, lingering uncertainties will need to be closely monitored once the rally cools.

As for the Singapore Blue Chip Index, today’s rebound has brought the index back to its 200-day moving average (MA)—a level that may act as resistance, especially for trend-following traders. The prospects of it being a temporary bounce remain, with greater conviction likely depending on the formation of a higher low, which may take time to materialise. Meanwhile, the daily RSI has returned to the midline, echoing the setup seen during the August 2024 rally, where a sustained move above the midline may be needed to signal for a more durable bullish view.

Similarly for the ASX 200, while the recent rebound has been encouraging, the broader lower-highs-lower-lows structure remains intact, with the risks of a lower high ought to be monitored. Immediate resistance lies near the 7,730 level—a former support now turned resistance. The daily RSI has also reverted to its midline, indicating a more neutral momentum backdrop. As with other indices, stronger confirmation of a trend reversal would likely require the formation of a higher high and higher low, which may still take time to develop.

What’s now for gold prices?

Gold prices have remained resilient thus far, likely with continued hedge against US-China tensions, which still carries significant global economic implications. Whether the gridlock will continue or this has marked the worst in US-China dynamics remain a huge uncertainty, but we may lean towards the former for now, where China’s tough rhetorics may be maintained. For gold prices, the broader upward trend remains intact, with its daily RSI offering a renew technical reset lately. However, we remain cautious of the potential risks of a near-term lower high, given the recent formation of a lower low at the start of this week. Any potential A-B-C corrective pattern may leave the US$2,880 level as a potential target for longs.