ASX buckles under tariff concerns; Soul Patts, Brickworks jump on $14b merger

Welcome to your five-minute recap of the trading day.

The numbers

The Australian sharemarket declined on Monday as investors were once again in a cautious mood as they grappled with US President Donald Trump’s trade wars. Investment firm Soul Patts and brick maker Brickworks soared after announcing a historic $14 billion merger.

The S&P/ASX 200 finished down 20.6 points, or 0.2 per cent, at 8414.10, with eight of its 11 industry sectors in the red. Energy stocks, utilities and miners posted the biggest declines. The Australian dollar was up 0.5 per cent at 64.61 US cents at the ASX close.

The ASX has lost ground on Monday.Credit: Louie Douvis

The lifters

Brickworks shares surged by 27.6 per cent to $35.10, while Soul Patts jumped 16.4 per cent after the companies announced plans to merge after more than five decades of cross-ownership holdings between them.

Under the proposed deal, Soul Patts shareholders will get one share of the new company for each share they own, while Brickworks investors get 0.82 new company shares for each of their shares, valuing Brickworks’ stock at $30.28 – a 10 per cent premium on Brickworks’ closing share price of $27.51 at the end of last week.

Soul Patts now owns 43 per cent of Brickworks, while Brickworks has a 26 per cent stake in the investment firm through a partnership dating back to 1969.

Meanwhile, BlueScope Steel shares rose 4.4 per cent on the back of Trump’s threat late on Friday to double tariffs on imported steel and aluminium to 50 per cent. BlueScope has extensive operations in the United States.

Gold miners also rose, with Evolution Mining up 3.1 per cent and Newmont up 1.2 per cent, as demand for safe haven assets such as gold was bolstered by the trade war uncertainty.

The laggards

Falls in the banks and the materials giants, which together make up about half of the local bourse, weighed down the ASX, with iron ore miners BHP (down 1.2 per cent), Fortescue Metals (down 2.5 per cent) and Rio Tinto (down 1.7 per cent) all declining as iron ore hit its lowest level since early May after Trump’s latest tariff shock.

Futures for the steel-making ingredient fell below $US95 a tonne overnight on concerns about an increase in global trade tensions. Trump, who visited a US Steel Corp. plant on Friday to champion a deal between US Steel and Japan’s Nippon Steel, said the new tariffs would take effect on June 4.

The big four banks also struggled, although Commonwealth Bank – the nation’s biggest lender, and the biggest stock on the ASX – had a late surge that sent its stock back into the green with a 0.3 per cent rise. ANZ Bank lost 0.2 per cent, National Australia Bank fell 0.7 per cent and Westpac shed 1.2 per cent.

Energy stocks also pared some early losses as oil prices jumped in the morning, but still closed lower. Woodside Energy lost 1.1 per cent, and Santos fell 1.5 per cent.

The lowdown

Markets were shaken once again by concerns about worsening trade tensions, prompting investors to hold back from taking risky bets. As the ASX declined, US index futures slipped, pointing to a weak start to the week on Wall Street tonight after China and the US accused each other of violating their trade agreement last month.

On social media, Trump late last week accused China of not living up to its end of the agreement that paused their tariffs against each other.

“So much for being Mr. NICE GUY!” he posted on his Truth Social platform.

Tariff headlines are once again dominating markets after a legal back-and-forth last week on the status of Trump’s century-high levies, which investors say may push the US into a recession. Amid uncertainty about US trade policy and negotiations with countries including China, market participants are also monitoring Trump’s sweeping tax bill, which threatens to boost the US deficit.

“We continue to be in an investment environment punctuated by escalating and de-escalating tariff and related pressures,” said David Chao, global market strategist at Invesco Asset Management in Singapore. “Markets are likely to respond in kind to these changing tariff winds.”

Hopes had been rising that the worst of such worries had passed, which in turn sent stocks rallying, after Trump paused his tariffs on both China and the European Union. A US court then on Thursday blocked many of Trump’s sweeping tariffs. It all sent the S&P 500 in May to its first winning month in four and its best since November.

But the tariffs remain in place for now while the White House appeals the ruling by the US Court of International Trade, and the ultimate outcome is uncertain.

Friday’s most influential losses on Wall Street came from several big tech stocks. Nvidia fell 2.9 per cent to give back some of its gain from earlier in the week after it topped analysts’ expectations for profit in the latest quarter. It was the single heaviest weight by far on the S&P 500.

In the bond market, Treasury yields eased after a report showed that the measure of inflation the Federal Reserve likes to use was slightly lower in April than economists expected.

With AP, Bloomberg

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