Australian shares closed sharply lower on Friday after fears of a trade war were sparked by US president Donald Trump’s surprise announcement of tariffs on imports of steel and aluminium.
The benchmark S&P/ASX200 index ended down 0.74 per cent at 5,928.9 points with all sectors in the red, led by losses in resources and industrial stocks.
Mr Trump announced tariffs on steel and imported aluminium after meeting with US industry officials, saying American steel and aluminium industries had been treated unfairly by other countries for decades.
He said he would sign off on the tariffs – 25 per cent on steel and 10 per cent on aluminium – next week.
Wall Street dropped sharply, with the Dow Jones Industrial Average falling 1.7 per cent.
Phillip Capital senior client adviser Michael Heffernan said while investors should not over-react and “take a cold shower” when a statement from the US president moves markets, the talk of tariffs sparked weakness in regional markets and the local resources sector.
“There is absolutely no fundamental problem with our market,” Mr Heffernan said.
“Just as (US Federal Reserve chair) Jerome Powell said: ‘the share market is not the economy’, its volatility doesn’t affect the underlying economics of America – or Australia – which are going great guns.”
After two days of market declines in the US sparked by fears of rapid interest rate hikes, trade war fears drove a further descent on Friday.
Asian-Pacific markets were all lower, with Japan’s Nikkei 225 down 2.4 per cent and on Friday afternoon US stock market futures were pointing to a further fall when trade starts for the Friday session there.
On the ASX, Australia’s biggest steel maker BlueScope closed up 13 cents, or 0.8 per cent higher, at $16.325, with its significant US interests likely to contribute a net benefit from the proposed 25 per cent US tariff on steel imports.
But iron ore miners BHP Billiton and Rio Tinto were down 1.6 and 1.3 per cent, to $29.63 and $76.86, respectively.
Goldminers Newcrest and Evolution were up one per cent and 0.7 per cent, each as investors sought the relative safe haven.
A drop in global oil prices left energy companies lower, with Woodside Petroleum down 0.4 per cent, to $28.50 and Santos down one per cent, to $4.92.
Woolworths was down 0.6 per cent after the Federal competition watchdog said it was launching Federal Court action accusing the company of falsely labelling its disposable picnic products as biodegradable.
Blood plasma products maker CSL which has significant US exposure, extended its Thursday 1.1 per cent fall, dropping another 0.9 per cent on Friday to be $160.05.
Australia’s top four banks were between 0.8 per cent and 0.4 per cent in the red, except for Westpac, which ended 0.1 per cent ahead.
And Telstra is at six year lows, trading five cents, or 1.5 per cent lower, to $3.27.
Meanwhile, the local currency has been climbing alongside other currencies against the greenback which has weakened since the overnight tariff announcement.
At 1700 AEDT, Australian dollar was at 77.61 US cents, up from 77.28 US cents.
ON THE ASX:
* The benchmark S&P/ASX200 index was down 44.4 points, or 0.74 per cent, at 5,928.9 points at 1630 AEDT.
* The broader All Ordinaries index was down 47.3 points, or 0.78 per cent, at 6,028.4 points
* The SPI200 futures contract was down 50 points, or 0.84 per cent, at 5,910.0 points.
* National turnover was 2.97 billion securities traded worth $6.1 billion.
CURRENCY SNAPSHOT AT 1700 AEDT:
One Australian dollar buys:
* 77.61 US cents, from 77.25 on Thursday
* 82.11 Japanese yen, from 82.54 yen
* 63.21 euro cents, from 63.38 euro cents
* 56.27 British pence, from 56.18 pence
* 106.70 NZ cents, from 107.29 cents
The spot price of gold in Sydney at 1700 AEDT was $US1,318.311 per fine ounce, from $US1,312.81 per fine ounce on Thursday.
BOND SNAPSHOT AT 1630 AEDT:
* CGS 4.50 per cent April 2020, 1.9624pct, from 1.9786pct
* CGS 4.75pct April 2027, 2.6792pct, from 2.6962pct
Sydney Futures Exchange prices:
* March 2018 10-year bond futures contract at 97.28 (implying a yield of 2.72pct), from 97.26 (implying a yield of 2.74pct) on Thursday
* March 2018 3-year bond futures contract at 97.93 (2.070pct), from 97.915 (2.085pct).
(*Bond market closes taken at 1630 AEDT previous local session; currency closes taken from 1700 AEDT previous local session)