‘Renewed hope’: ASX 200 climbs to record high on Wednesday morning

Australia’s sharemarket has opened at a new record high to start Wednesday’s trading, as investors count on a China-US trade deal and further interest-rate relief from the central bank.

The benchmark ASX200 surpassed 8630 points shortly after the opening bell, beating the previous high of 8615 set back on February 14.

IG Market analyst Tony Sycamore told NewsWire that sharemarkets were climbing a “wall of worry”, with several misses economically leading to renewed hopes of rate cuts.

“When you put the weak China number together with weak consumer confidence in Australia and dig below the surface in the US job numbers, it is probably arguing for more rate cuts from central banks, which is probably the hope that drives these stockmarkets,” he said.

“Along with hopes of trade deals, that is why we are still near a record high.”

In China deflation deepened to its worst level in almost two years in May, while US job figures came in hotter than expected, although this was only due to the participation rate plummeting.

There were also renewed hopes of a trade talk between the US and China, with investors hoping a deal can be worked out between the two largest economies ahead of the July tariff deadlines.

US President Donald Trump announced on April 2 a global tariff policy on just about every trading partner on the basis of evening up the US trade deficit.

Mr Trump eventually paused the majority of his tariff policy for 90 days due to the damage that was being done to his own economy and money markets.

He also faced a challenge in the federal courts over his use of power.

Global markets are now factoring in trade talks between the US and China will result in a deal as representatives from each of the two largest economies meeting in London.

Commerce Secretary Howard Lutnick and US Trade Representative Jamieson Greer will remain in London to continue negotiations with Beijing, as senior officials return home.

Mr Lutnick said the talks had been “productive.”

Domestically, Australia’s latest Westpac consumer sentiment index shows Australians are feeling “cautiously pessimistic.”

Mr Sycamore said weak consumer confidence showed the Reserve Bank of Australia needed to do more to help lift household spending and could lead to a rate cut in July, with lowering interest rates likely good for Australia’s financial sector.

“If rates fall back to 3.1 per cent, which is close to where we think neutral is for the RBA, that improves affordability which adds more demand for credit for the big banks,” he said.

“What happens to their margins? I don’t think there’s much of a difference between 3.85 or 3.1 per cent, there’s still enough fat on the bone to make their generous profits.”