ASX closes in the red after Wall Street tumbles on US-China tensions

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

The numbers

The Australian sharemarket closed lower on Friday, capping off a turbulent week on financial markets as US President Donald Trump’s trade war continues to threaten the world economy.

Wall Street gave up a big chunk of their historic gains from Wednesday as Donald Trump’s trade war continues to confuse and threaten the economy.Credit: AP

The ASX200 fell by 63.10 points, or 0.82 per cent, to 7646.5 points after a negative lead from Wall Street overnight. The decline comes after the ASX surged 4.5 per cent on Thursday, sparked by Trump’s decision to temporarily back off on most of his planned tariffs.

Meanwhile, the Australian dollar rallied on Thursday night, after falling under US60¢ this week due to fears about the economic damage unleashed by Trump’s trade war. The currency was fetching US62.01¢ at 4.30pm AEST.

The lifters

Consumer discretionary was the only sector to finish the day in the green, led by a 2 per cent lift from conglomerate Wesfarmers, the owner of Kmart, Officeworks and Bunnings Warehouse.

The consumer staples sector was performing strongly at lunchtime, but finished flat. It was buoyed by the supermarket giants, with Woolworths lifting by 0.3 per cent and Coles adding 0.5 per cent.

The laggards

Investors dragged down the share prices of miners, which are heavily exposed to any slowdown in China due to Trump’s trade policies, with BHP slumping 1.6 per cent and Rio Tinto shedding 1.2 per cent. Fortescue lost 0.1 per cent.

The big four banks were mixed. Commonwealth Bank – the biggest stock on the index – finished slightly higher, up 0.1 per cent. Westpac fell 1.9 per cent, while NAB and ANZ both fell 1.7 per cent.

The lowdown

On Thursday night, the S&P 500 tumbled 3.5 per cent, slicing into Wednesday’s surge of 9.5 per cent following Trump’s decision to pause many of his tariffs worldwide. The Dow Jones dropped 1014 points, or 2.5 per cent, and the Nasdaq composite tumbled 4.3 per cent.

Shane Oliver, chief economist and head of investment strategy at AMP, said that sharemarkets had taken a “roller coaster ride” across the last week.

“The good news is that Trump clearly has a pain threshold and that share and bond markets are still able to impose some constraints around his policies,” Oliver said.

“We expect this to become more apparent in the second half of the year forcing Trump to back down further on tariffs and pivot towards the positive aspects of his agenda … [and] helping to support a more sustained recovery in sharemarkets.”

“However, it’s way too early to say that we have seen the low in shares as there is a long way to go with the tariff battle [and] stress is continuing to build in US asset markets,” he said.

“Australia is likely to avoid a recession in the absence of Trump continuously ramping up tariffs, as only 5 per cent of our exports go the US ... and there’s lots of scope for RBA rate cuts.”

The losses for US stocks accelerated on Thursday after the White House clarified that the United States will tax Chinese imports at 145 per cent, not the 125 per cent rate that Trump had written about in his posting on Truth Social on Wednesday, once other previously announced tariffs were included. The drop for the S&P 500 exceeded 6 per cent at one point.

China, meanwhile, has reached out to other countries around the world in apparent hopes of forming a united front against Trump. The world’s second-largest economy is also ramping up its own countermeasures to Trump’s tariffs.

The European Union said on Thursday it would put its trade retaliation measures on hold for 90 days and leave room for a negotiated solution.

Thursday’s swings also hit the bond market, which had been showing encouraging signals earlier in the day that stress may be easing.

The bond market has historically played the role of enforcer against politicians and economic policies it deemed imprudent. It helped topple the United Kingdom’s Liz Truss in 2022, for example, whose 49 days made her Britain’s shortest-serving prime minister.

Earlier this week, big jumps for US Treasury yields had rattled the market, so much that Trump said on Wednesday he had been watching how investors were “getting a little queasy”.

Several reasons could have been behind the sharp, sudden rise in yields. Regardless of the reasons, higher Treasury yields crank up pressure on the stock market and push rates higher for mortgages and other loans for US households and businesses.

The 10-year Treasury yield had calmed following Trump’s U-turn on tariffs, dropping all the way back to 4.30 per cent shortly after the release of a better-than-expected report on inflation on Thursday morning. As Thursday progressed, though, the 10-year Treasury yield climbed once again and reached 4.40 per cent.

Tweet of the day

Quote of the day

“Trump – who has vowed to place tariffs on imported copper and invoked emergency powers to boost the ability of the US to produce critical minerals – may offer a way forward for resources giant Rio Tinto’s proposed Resolution open cut copper mine, which is 55 per cent owned by Rio and 45 per cent held by BHP.”

That’s Simon Johanson on how Trump could unlock a copper bonanza for Rio Tinto. You can read more of that here.

With AP

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