Australian shares have plunged to a six-week low after fears of a trade war, sparked by import tariffs imposed on China by US President Donald Trump, shook global markets.
The benchmark S&P/ASX200 index fell 1.96 per cent to 5,820.7 points, shedding $40 billion in value, with major mining and metals stocks suffering the worst impact, while the All Ordinaries lost 1.9 per cent to close at 5,929.0 points.
After a muted performance until Thursday, Friday’s losses took the Australian market to a two per cent fall for the week.
Mr Trump moved on Thursday in the US to impose tariffs on up to $US60 billion worth of Chinese imports and China retaliated with plans for tariffs on up to $US3 billion of imports from US.
Markets fell across Asia, with Japan’s Nikkei down 4.4 per cent in afternoon trade, Hong Kong’s Hang Seng Index down 2.8 per cent and South Korea’s KOSPI falling 2.4 per cent.
Adding to the pain for Australia was a surprise announcement from the White House that exemptions granted to heavy steel and aluminium import tariffs would only be temporary, pending new negotations, and that quotas may be imposed on imports of the metals.
CommSec market analyst Steven Daghlian said while the initial reaction on Australian markets was sharp, the tariffs are still only in the mind of President Trump.
“It should be emphasised that these are only proposals, not actual tariffs,” Mr Daghlian said.
“However, a tit-for-tat trade feud between our closest trading partner and key ally does have direct implications,” he said.
One third of all exported goods out of Australia find a home in China, the majority being raw materials that Chinese manufacturers on-sell as exports to the US.
Local producer Bluescope Steel dropped 92 cents, or 5.9 per cent to $14.78 and the diversified miner South32 fell 18 cents, or 5.3 per cent, to $3.20.
The price of iron ore on the Dalian Commodity Exchange dropped about six per cent on Friday, while iron ore heavyweight BHP Billiton was down 93 cents, or 3.1 per cent, to $28.77 and Rio Tinto had dropped $3.34, or 4.4 per cent to $73.44.
Elsewhere, retailer Myer fell 10 per cent to a new all-time low of 35.5 cents, after UBS analysts questioned the embattled department’s store chain’s sustainability.
Losses among the four major lenders banks were led by the Commonwealth Bank, down 2.8 per cent, to 72.81.
Westpac lost 2.5 per cent to $28.85, ANZ dropped 48 cents, or 1.7 per cent, to $27.70 and National Australia bank shed 49 cents, or 1.7 per cent, to $28.97.
Transurban acquired a road and bridge toll in Canada for $A843 million and its shares fell 1.1 per cent to $11.05.
Vocus was 2.1 per cent lower, at $2.37, as the ACCC announced the telco’s Dodo, iPrimus and M2 Commanders businesses would compensate almost 6,000 customers for selling NBN packages that could not deliver advertised speeds.
With the US dollar weaker, falling below 105.00 Japanese yen for first time in 16 months over night, the local currency was worth 77.09 US cents, down from 77.43 US cents on Thursday.
ON THE ASX:
* The benchmark S&P/ASX200 was down 116.5 points, or 1.96 per cent, at 5,820.7 points
* The broader All Ordinaries index was down 114.2 points, or 1.89 per cent, at 5,929.0 points
* The SPI200 futures contract was down 124 points, or 2.1 per cent, at 5,794.0 points.
* Market turnover was 3.4 billion shares traded worth $6.9 billion.
CURRENCY SNAPSHOT AT 1700 AEDT:
One Australian dollar buys:
* 77.09 US cents, from 77.43 on Thursday
* 80.79 Japanese yen, from 82.01 yen
* 62.50 euro cents, from 62.72 euro cents
* 54.63 British pence, from 54.74 pence
* 106.75 NZ cents, from 107.14 cents
The spot price of gold in Sydney at 1700 AEDT was $US1,338.28 per fine ounce, from $US1,328.00 on Thursday.
* CGS 4.50 per cent April 2020, 2.0276ct, from 2.0608pct on Thursday
* CGS 4.75pct April 2027, 2.62pct, from 2.67pct
Sydney Futures Exchange prices:
* June 2018 10-year bond futures contract was 97.34 (implying a yield of 2.66pct), from 97.285 (2.715pct) on Thursday
* June 2018 3-year bond futures contract was 97.84 (2.16pct), from 97.78 (2.22pct)
(*Bond market closes taken at 1630 AEDT previous local session; currency closes taken from 1700 AEDT previous local session)