Australian shares surged on Thursday, recovering from recent losses, following Donald Trump's decision to back down from his threat of tariffs on European allies. This move, part of his strategy to gain control of Greenland, sparked a global market rally that significantly impacted Australia's S&P/ASX 200 index, pushing it briefly above 8,860 points before a slight dip. The market's positive response was driven by the 'Trump Always Chickens Out' trade strategy, where investors anticipate the US president's retreat from tariff threats. However, the deal's legitimacy is questioned by Sascha Faxe, a Danish parliament member, who suggests that Greenland must be part of the negotiations for any deal to be real. Despite this, veteran financial commentator Michael McCarthy notes that the market's risk is increasing, with all indicators pointing upwards post-geopolitical tension easing. He warns that potential triggers for a global equity correction include inflation, heightened geopolitical tensions, and a US bond sell-off, which would indicate investors' loss of faith in US policies. Chris Weston, from Pepperstone, advises investors to wait for more details on Trump's Greenland deal before dismissing further European risks. Australia's share market, bolstered by strong commodity prices, particularly iron ore and gold, has been resilient. However, sticky inflation and the possibility of an imminent interest rate hike have constrained stock market gains. The ASX momentum paused after a positive Australian jobs report, raising the possibility of a rate rise in the near future, which generally negatively impacts stocks. Despite this, the Australian dollar has reached a 15-month high against the US dollar, trading near 68c.
