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 negotiations, 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
GOLD:
The spot price of gold in Sydney at 1700 AEDT was $US1,338.28 per fine ounce, from $US1,328.00 on Thursday.
BOND SNAPSHOT:
* 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)
With the US and Canadian markets closing down more than one per cent on Friday, CommSec chief economist Craig James predicts similar falls for local stocks when the market opens today.
A fall of one per cent or 58 points would drop the benchmark index well below 5786 - a mark last crossed on October 12, 2017.
"If we're going to get any support, it's going to come from the energy and the gold sector," Mr James said on Sunday.
"Gold was up quite substantially on Friday and we also had some really good gains with the oil price.
"Those gains are going to help our market but the iron ore price moved the other way so that's going to weigh the major iron ore producers. Base metals were also down."
"There's an expectation that tariffs will be imposed by the United States on China but it hasn't happened yet," Mr James said.
"It's a negotiating ploy by the US.
"If you can get some degree of reconciliation between the two parties, we will see the markets bounce from the lows."
Elsewhere, it's expected to be a quiet four-day week ahead of the Easter break.
ANZ-Roy Morgan Consumer Confidence weekly survey is expected to come out on Tuesday, while reports on private sector credit and jobs by industry should be available later in the week.
The Australian Competition and Consumer Commission on Thursday is expected to rule on Saputo's takeover of one of Australia's largest milk producers, Murray Goulburn.
A pair of independent reports earlier in March backed the Canadian giant's $1.3 billion offer for the troubled dairy processor, which boasts Devondale among its consumer brands.
Murray Goulburn has estimated that the net equity value of the Saputo offer is about $653 million.
Wall Street has tumbled with more than 1000 points knocked off the Dow in two days as investors, increasingly nervous about a potential US trade war with China, shied away from risk ahead of the weekend.
In a volatile session, the S&P 500 came within a hair of its 200-day moving average, a key technical level. The benchmark index also nudged closer to its February low, which marked a correction, ending 9.9 per cent lower than its January 26 record.
"There is concern what the trade war could look like. Investors want to manage their risk. If it escalates rapidly, it could be a major headwind for the market," said Peter Kenny, senior market strategist at Global Markets Advisory Group, in New York.
President Donald Trump's plans for tariffs on up to $60 billion in Chinese goods moved the world's two largest economies closer to a trade war.
China has declared plans to levy duties on up to $3 billion of US imports including fruit and wine, even as it urged the United States to "pull back from the brink".
The Dow Jones Industrial Average fell 424.69 points on Friday, or 1.77 per cent, to 23,533.2, the S&P 500 lost 55.43 points, or 2.10 per cent, to 2588.26 after hitting an intraday low that was barely above its 200-day moving average of 2585.22.
The Nasdaq Composite dropped 174.01 points, or 2.43 per cent, to 6992.67.
For the week, the Dow was down 5.67 per cent, the S&P 500 was down 5.95 percent and the Nasdaq was down 6.54 per cent, marking their biggest weekly percentage falls since January 2016.
The Dow was down 11.6 per cent since its January 26 high, and hit its lowest close since confirming a correction in February.
The Cboe Volatility Index, the most widely followed barometer of expected near-term volatility in the S&P 500, finished up 1.53 points at 24.87, its highest close since February 13.
The S&P's financial sector was the S&P's biggest percentage loser, at three per cent, after a volatile session in which it was whip-sawed by volatile Treasury yields.
Bloomberg News cited China's ambassador to the United States saying that the country is "looking at all options" in response to tariffs, which could include scaling back purchases of US Treasuries.
Nasdaq was weighed down by declines in momentum stocks such as Facebook, Amazon.com, Microsoft and Google's parent Alphabet.
The semiconductor sector took a fall after Micron Technology's quarterly report stoked fears about falling NAND prices. The Philadelphia Semiconductor index slumped 3.3 per cent.
Declining issues outnumbered advancing ones on the NYSE by a 3.96-to-1 ratio; on Nasdaq, a 3.72-to-1 ratio favoured decliners.
The S&P 500 posted two new 52-week highs and 42 new lows; the Nasdaq Composite recorded 23 new highs and 93 new lows.
Volume on US exchanges was 8.11 billion shares, above the 7.3 billion average for the last 20 trading days.
Source: Netwealth Morning Business Roundup
A short trading week so let's start it off with Blueberry Crumble Muffins and whoa - look at that - it's coffee!!
Nice to see the canine companions of some of the HC community over at the Weekend Lounge.
In consideration of others, PLEASE include the STOCK CODE in all your posts.
Happy trading, play nicely and make informed decisions.
