Australian shares have risen in early trade, following Wall Street’s technology-driven gains overnight.
By 10:25am AEST, the benchmark ASX 200 index was up 0.7 per cent to 5,934 points.
Every sector was trading higher, led by technology (+2.2pc) and industrials (+1.2pc) in the lead.
The best performing stocks were Seek (+5.8pc), Afterpay (+2.6pc), Breville Group (+3pc) and Megaport (+3.5pc).
On the flip side, Beach Energy (-1.5pc), Bank of Queensland (-1pc) and Cooper Energy (-1.4pc) were the weakest performers.
The Australian dollar slipped (-0.2pc) to 72.9 US cents.
It was a modest pullback, compared to its overnight peak of 73.43 US cents.
Investors are hopeful that the Federal Reserve will stick with its ‘ultra-easy’ monetary policy, to stimulate the United States out of recession, at its two-day meeting this week.
On Wall Street, the tech-heavy Nasdaq outperformed the other two major indices, after jumping 1.2 per cent to 11,190 points.
It was boosted by heavyweight tech-related stocks like Facebook (+2.4pc), Amazon (+1.7pc), Google’s parent company Alphabet (+1.7pc) and Microsoft (+1.6pc).
The S&P 500 lifted 0.5 per cent to 3,401, while the Dow Jones was flat at 27,996 points.
European markets also closed higher, including Britain’s FTSE (+1.3pc) and Germany’s DAX (+0.2pc).
US broke trade rules by starting trade war
The United States had breached global trading rules by imposing multi-billion-dollar tariffs in President Donald Trump’s trade war with China, according to findings by the World Trade Organization overnight.
Unsurprisingly, its ruling drew anger from Washington.
“This panel report confirms what the Trump administration has been saying for four years: the WTO is completely inadequate to stop China’s harmful technology practices,” US Trade Representative Robert Lighthizer said in a statement.
The Trump administration had previously said the tariffs it threatened on $US500 billion worth of Chinese goods were justified because China was forcing companies to transfer technology and intellectual property.
But the WTO’s three-person panel said the US duties broke trading rules because they applied only to China and were above maximum rates agreed by the United States.
It also found that Washington had not adequately explained why its measures were a justified exception.
The panel recommended the United States bring its measures “into conformity with its obligations”, but also encouraged the two sides to work to resolve the overall dispute.
“Time is available for the parties to take stock as proceedings evolve and further consider opportunities for mutually agreed and satisfactory solutions,” it said.
China’s commerce ministry said Beijing supported the multilateral trading system and respected WTO rules and rulings, and hoped Washington would do the same.
WTO crippled from taking further steps
The United States could appeal against Tuesday’s ruling.
However, that would put the case into a legal void, because Washington has already blocked the appointment of judges to the WTO’s appellate body, preventing it from convening the minimum number of judges required to hear cases.
The WTO panel was aware it was stepping into hot waters. It noted that it had looked only into the US measures and not China’s retaliation, which Washington has not challenged at the WTO.
As he left the White House for a campaign rally, Mr Trump said he would, “have to do something about the WTO because they’ve let China get away with murder”.
Mr Trump said he needed to take a closer look at the ruling.
“I’m not a big fan of the WTO — that I can tell you right now. Maybe they did us a big favour.”
The decision could help fuel a Trump decision to leave the WTO or underpin US arguments for reforming the 25-year-old trade body.
“It gives the administration ammo to say the WTO is out of date,” said Margaret Cekuta, a former USTR official who helped write a crucial report on China’s intellectual property abuses that preceded Mr Trump’s tariffs.
“If they can’t rule on intellectual property rights, then what is their position in the broader economy going forward?”
Mr Trump has previously described the WTO as “horrible” and biased towards China, threatening to quit.
The President, critical of multilateral institutions, has already pulled the United States out of the UN cultural organisation, UNESCO, and plans to leave the World Health Organization (WHO).
The US and China de-escalated their trade war by signing a ‘Phase 1’ trade deal in January, which rolled back some of the existing tariffs.
Extra tariffs are still in place on some $US370 billion worth of Chinese goods.
US economic recovery slowing down
“While the economy is slowing, the upcoming macro news should be friendly, which should indicate the Fed will have no change in terms of policy,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.
US factory production increased (+1pc) for a fourth straight month in August, despite signs of the recovery slowing down. It jumped 3.9 per cent in the previous month, July.
Also, US import prices increased more than expected (+0.9pc) last month, supporting the view that inflation pressures were building up.
Oil prices rose, supported by hurricane supply disruptions in the United States, but forecasts of a slower-than-expected recovery in global demand from the pandemic weighed.
Brent crude futures rose jumped 2.6 per cent to $US40.63 per barrel.
Gold slipped (-0.1pc) to $US1,953.71 as the US greenback rose, although hopes for a dovish monetary policy stance from the Fed limited the safe-haven metal’s losses.