ASX 200 Reacts to US/China Trade Talks

• The United States and China announced significant tariff reductions following trade negotiations.
• Global indices rallied in response to optimism surrounding US-China trade developments.
• Despite the broader ASX 200 uptrend, sectoral performance remains mixed, revealing a notable bifurcation between winners and laggards. 

During the trading session on Monday, the ASX 200 gapped higher at the open, pulled back to fill the gap, and then recovered modestly. This price action suggests that news-driven traders are stepping in, reacting to reports that the United States and China will drastically reduce tariffs and have given themselves 90 days to negotiate a broader agreement. This development has an outsized influence on Australia, as the country is a major supplier of raw materials to China. Ultimately, as China goes, so goes Australia.

National Australia Bank Limited (NAB)

National Australia Bank dropped a notable 2.3% during Monday’s session, despite gaining 7.37% over the last month. Over the past year, the financial giant is up 5.56%. It’s worth noting that NAB closed off its session lows, with the 50-day EMA sitting just below, around the AU$35 level.

The stock has been consolidating around the 200-day EMA, suggesting that the market may be in the process of building significant momentum.

SGH Limited (SGH)

SGH Limited gained 1.9% during the session as the industrial company continues its impressive upward trajectory. Over the past year, SGH has rallied 28.87%, with 9.63% of that gain occurring in the last month alone.

Volume has remained relatively steady, even as the stock consolidates just below the AU$52 mark, an area that has acted as a ceiling in recent weeks. A decisive break above this level could trigger renewed momentum. That said, given the sharp recovery in recent weeks, the current consolidation may simply be a phase of attracting new participants before the next move.

James Hardie Industries (JHX)  

James Hardie Industries gained 1.13% during the session, continuing its efforts to recover from a difficult year. Over the past 30 days, JHX has rallied 10.31%, showing strong momentum. However, the stock remains down 3.9% over the last 12 months, highlighting its longer-term challenges.

The upcoming earnings report next Tuesday may serve as the next key catalyst, especially if forward guidance surprises to the upside. The market appears to be in the process of bottoming, and traders will be watching closely. A break above the 50-day EMA, currently sitting just above the AU$40 level, could trigger further gains and possibly spark a short-covering rally.

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