It’s going to be a nervous day’s trading in Australia and Asia today after the rumbles from Donald Trump’s escalation of his trade war with China whacked global markets on Friday.
Eurozone shares fell 2.9% on Friday in a catch up to falls in the US share market and the US S&P 500 fell 0.7% as the latest escalation in Trump’s trade war continued to rattle investors.
Trump’s tweeting sent shockwaves through global markets, pushing shares, bond yields, oil lower and gold higher.
Contrary to the weak global lead and a further sharp fall in the iron ore price, ASX futures were flat on Friday night, but the overnight futures market closed with a 21 point loss early Saturday, Sydney time, pointing to a soft start here.
But it could very well be much softer than that given the slump in global copper and iron ore prices on Friday night.
While oil and gold prices rose, the latter will have the most positive impact here today.
So while the likes of Rio Tinto, BHP, Fortescue, OZ Minerals and Newcrest come under pressure because of the falls in copper and iron ore, the higher gold prices will help Newcrest and OZ Minerals resist a big sell down, while pure gold miners like North Star, ST Barbara, and Regis will see their shares surge.
Oil stocks like Woodside and Santos should see a bounce, but the negatives from iron ore’s slide (it’s down 14% from the most recent peak of $US125.77 a tonne on July).
The fall in the value of the Aussie dollar should be another positive, especially for gold miners. The dollar closed at 68.02 US cents after touching a day’s low of 67.73 cents.
Last week’s rate cut from the Fed had no impact by Friday and tomorrow’s meeting of the Reserve Bank here won’t have an impact as well – Trump’s escalation of the trade war will shake momentum and investor confidence.
The ASX 200 Index ended 24.8 points, or 0.4%, weaker on Friday at 6768.6 despite that new record high on Tuesday. The All Ordinaries fell 33.3 points, or 0.5%, to 6846.1.
Australian bond yields fell sharply on Friday night. The yield on the key 10-year bond dipped to 1.08%, an all-time low for a fall of 12 points in a day. Demand from foreign buyers is reportedly soaring because Australian bonds pay positive yields.
Friday saw the entire German government bond yield curve fall into negative territory. That means that from the shortest bond to the longest (30 years) the yield is negative, meaning investors are paying the German government to hold its bonds.
