Australian share market hit by US, China trade war tensions

The Australian share market has fallen with almost $25 billion wiped from its value, as traders worry that US-China trade tensions could worsen further.

Almost $25 billion has been cut from the value of Australia’s biggest companies as another wave of fear washes over the share market.

The bourse was again a sea of red as the trade war between the US and China intensified at the weekend.

Late on Friday, China announced it would levy new import taxes on $US75 billion worth of goods shipped in from the US each year.

US President Donald Trump quickly retaliated, announcing a hike in planned tariffs on $300 billion worth of Chinese goods, from 10 per cent to 15 per cent.

Officials in the US also declared existing tariffs on another $250 billion in Chinese goods would rise from 25 per cent to 30 per cent on October 1.

Wall Street buckled on Friday as China and the US exchanged blows. The Dow Jones Industrial Average surrendered 2.4 per cent, continuing its run of volatility in recent weeks.

Every other sector other than utilities, which fell 0.9 per cent, was at least 1.0 per cent in the red.

Energy shares were the hardest hit, collectively down 3.1 per cent as the price of Brent crude dipped to $US59.

Woodside Petroleum dropped 3.7 per cent, Oil Search was down 2.7 per cent and Santos fell 2.5 per cent.

Viva Energy fell 7.9 per cent to a two-month low of $2.10 after the Shell petrol station licensee reported its half-year profit had dropped 43 per cent. Gold miners were the only bright spot as the price of the precious metal reached $US1542 an ounce, its highest price since April 2013.

The ASX has took $32.5 billion hit at the open, as shares plunged.. Picture: AAP

Newcrest gained 4.6 per cent to $36.05, Northern Star climbed 8.7 per cent to $12.39, Evolution was up 9 per cent to $5.33 and Westgold shot up 20.2 per cent to a two-year high of $2.35.

Elsewhere in the materials sector, Boral fell 20.6 per cent to a six-year low of $3.94 after the building materials maker’s underlying net profit slumped 7.0 per cent.

Mining giant BHP gained 2.1 per cent to $36.49, Rio Tinto was down 2.6 per cent to $82.78 and Fortescue Metals dropped 5.3 per cent to $7.17 despite the iron ore producer almost tripling its full-year profit.

The big four banks were all lower, with ANZ down 1.4 per cent to $26.27, Commonwealth down 0.8 per cent to $76.76, NAB down 1.0 per cent to $27.06 and Westpac down 0.7 per cent to $27.62.

Macquarie fell 2.2 per cent and IOOF fell 6.9 per cent after it set aside another $235 million for customer remediation.

Amaysim plunged 23 per cent to an all-time low of 51.5 cents after the mobile and energy plan provider said its full-year underlying earnings had dropped by a third.

G8 Education fell 16 per cent to a 10-month low of $2.30 after reporting a mixed performance at its recently acquired childcare centres.

Adairs gained 11.8 per cent to a two-month high of $1.755 after the homeware company reported its full-year sales grew 9.7 per cent.

The Aussie dollar is buying 67.50 US cents, from 67.53 US cents on Friday.

The latest hit also extends a bout of heightened volatility for the Aussie market.

Late in July, the ASX 200 had closed at an all-time high of 6845.1 points, breaking a record that had been standing for more than a decade.

Since then, it has fallen more than 400 points, or almost 6 per cent. It has also sustained four days with losses of more than 1 per cent, including a 2.9 hit earlier this month.

That drop came as a key “recession indicator” — an inverted yield curve on government bond — flashed red in the US.

By comparison, the index has climbed more than 1 per cent during just one session this month.

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Scott Morrison is currently at the G7 summit in France after receiving a special invitation. Picture: AAP

CommSec chief economist Craig James told AAP yesterday that the trade was creating uncertainty in other parts of the world.

“It’s all about the US-China trade war and it’s all about Donald Trump and his tweets on the situation,” he said.

“It’s all about what it means for global growth when you have the two biggest nations in the world trading tariffs against one another.

“It creates uncertainty about new investment, new employment, and that’s the issue at hand.”

Reacting to China’s tariff announcements overnight Friday, Mr Trump declared on Twitter than he had “hereby ordered” US companies with operations in China “to immediately start looking for” an alternative.

“This is a GREAT opportunity for the United States” he wrote.

“Our great American companies are hereby ordered to immediately start looking for an alternative to China, including bringing... your companies HOME and making your products in the USA.”

TRUMP FACES PRESSURE AS TRADE WAR DEEPENS

St George Bank senior economist Besa Deda said in a research report for investors that the trade stoush had taken “another turn for the worse”.

“When the US president demands that US companies ‘immediately start looking for an alternative to China’, you know that trade relations are getting increasingly frosty,” she said.

Ms Deda also noted trade developments and political risk were “front and centre of discussions” during the conference of central bankers at Jackson Hole, in the US state of Wyoming, at the weekend.

Speaking at the event on Sunday, Reserve Bank governor Philip Lowe said the world economy was “experiencing a series of significant political shocks”, including the “serious issues” between the US and China and Brexit.

Those shocks were “generating considerable uncertainty”, Dr Lowe said.

“Faced with this uncertainty, businesses are reconsidering their investment plans,” he said.

The plunge comes as G7 leaders meet in France amid a trade war between China and the US. Prime Minister Scott Morrison is also in attendance after Australia was extended an invitation for the first time.

White House economic adviser Larry Kudlow says Mr Trump is not having second thoughts about hiking tariffs on China, a move that further escalated the trade war that is rattling financial markets worldwide.

Trump seemed to say on Sunday that he had second thoughts about fuelling the trade war with China. But Kudlow says the only second thought the president had was that he didn’t raise the tariffs higher than he did.

World leaders hope US President Donald Trump will work to reduce tensions with China as the global economy softens. Picture: AAP

Last week, Beijing slapped new tariffs on $75 billion ($A111 billion) in American goods. Kudlow says China’s retaliatory action was a “moderate action” and Mr Trump took a “measured, proportionate” action in response by increasing tariffs by 5 percentage points on Chinese goods.

The US President is facing pressure from allies at the Group of Seven summit in France to reduce, not escalate, tensions with China due to the softening global economy.