Local stocks take $25bn trade war hit as US-China tensions ramp up

The local bourse dropped 1.3pc as a ratcheting up of trade-war tensions sent global markets tumbling.

Markets across Asia were a sea of red following the ratcheting up of US-China trade tensions. Picture: AAP

The ASX 200 sold off sharply on Monday after the US-China trade war escalated over the weekend, with the US threatening to raise tariffs on Chinese goods to 30 per cent, after China flagged tariff hikes of its own against the US.

At the close of trade, the ASX benchmark S&P/ASX200 had lost 83.03 points, or 1.27 per cent to 6440.102 points. The broader All Ordinaries index had dropped 83.319 points, or 1.26 per cent to 6531.0 points.

China’s currency weakened to a new multiyear low, weeks after Beijing first allowed it to trade beyond the symbolic level of 7 yuan per dollar. The currency is both a flashpoint in relations with the US and a means for China to make its exports more competitive, helping to offset the impact of American import tariffs.

The onshore yuan dropped by 0.9 per cent to 7.1448 against the dollar, its weakest point since February 2008. The offshore yuan — which trades more freely — dropped to as low as 7.1858 per dollar, marking a weak point in the nine years since Beijing allowed the currency to trade in Hong Kong and elsewhere outside mainland China.

South Korea’s Kospi, already in negative territory for the year, retreated another 1.6 per cent, while Japan’s Nikkei 225 dropped more than 2 per cent as the Japanese yen, a haven currency that typically gains in times of market stress, strengthened to 105.27 per US dollar.

Hong Kong’s Hang Seng index fell about 3 per cent, putting it on course for its worst day this year. While China’s Shanghai Composite had shed 1.1 per cent by 4.30pm (AEST).

Prices for safe US government debt rose, pushing yields even lower. Yields on the 10-year US Treasury declined by 0.08 percentage point to 1.4443 per cent, according to Refinitiv. That put the note’s yield within 0.1 percentage point of the record closing low it registered in 2016. Sovereign bonds from Australia, South Korea and Japan rallied as well.

“There is an ever-growing belief that Trump has no fear of risk assets declining and the market feels vulnerable,” said Pepperstone research head Chris Weston.

“The fact that many are now seeing the division between Xi and Trump as something more sinister than just a trade war has seen calls for a global recession increase.

“With calls that what we are seeing unravel is more of an economic war, and while the further 5 percentage point increase in tariffs will not help the perception of growth and US consumption, the concern traders have here is whether this even opens the top level of tariffs to over, say 50 per cent.”

China’s Ministry of Finance announced on Friday that it would apply tariffs of between 5 per cent and 10 per cent on $US75 billion worth of US imports.

BHP gave back 2.1 per cent to $34.69 while Rio Tinto lost 2.6 per cent to $82.78.

Fortescue sank 5.3 per cent to $7.17 after it posted a record annual earnings figure and boosted its dividend payout.

In financials, Westpac slid 0.7 per cent to $27.62 while Commonwealth Bank was cut by 0.8 per cent to $76.76. NAB lost 1 per cent to $27.06 while ANZ turned down 1.4 per cent to $26.27.

Building materials company Boral tumbled 20.6 per cent to $3.94 after its full-year results failed to meet consensus estimates.

Challenger telco and energy company amaysim tanked 23.1 per cent to 52 cents after it said it was well positioned to take advantage of growth opportunities in the year ahead, but flagged materially lower earnings in fiscal year 2020 compared to the prior year.

Healthcare provider Monash IVF fell 3.5 per cent to 96c after it delivered an annual net profit after tax down 7 on the prior year.

Meanwhile Japara Healthcare stepped back 1 per cent to $1.04 after the aged care service provider flagged lower earnings for the year ahead and it slashed its final dividend, as it delivered a net profit figure down nearly 20 per cent on the prior year.

G8 Education plunged 16.1 per cent to $2.30 after it delivered a 20 per cent drop in first-half net profit to $19 million but said the long-term fundamentals of the sector were very attractive.

McGrath was unchanged at 24c despite the real estate agency noting that property listings remained subdued, as it delivered an annual after tax loss of $15.6 million for the full-year through June.

OOh!media sank 4.6 per cent to $2.91 after it posted a 94 per cent plunge in profit for the half year and warned of a slowdown in advertising spend.

Elsewhere, Shaver Shop jumped 6.3 per cent to 51c after it lifted its annual profit and said strong sales growth has continued into the new financial year.

The Australian dollar was trading slightly lower at US67.35c in late trade after dipping below US67c in early trade.