Donald Trump’s escalation of his trade war with China late last week took its toll on the ASX yesterday.
Trump’s inflammatory escalation and the threat of 10% tariffs on $US300 billion of Chinese imports saw Wall Street fall; on Friday, and big falls in key commodities such as iron ore, copper and other metals.
A sharp rise in investor concern saw bond yields fall around the world with the Aussie 10 year yield remaining at an all-time low of 1.08% and the yield on the German 10-year bond yield fell to 0.54% from 0.50%.
Australia’s ASX 200 closed 1.9% or close to $38 billion yesterday. The major driving force was the fall in the value of the Chinese off-shore currency, the yuan, dropped below the 7-yuan-for-$US1 for the first time in 11 years.
It was the biggest slump for the ASX 200 in eight months.
We warned yesterday that iron ore and copper stocks would be hit hard when trading resumed on Monday, while gold and oil shares might withstand a lot of pain because of rises on Friday night in the prices of gold and crude oil.
The 21 point fall in the ASX 200 futures on Friday night gave no indication of the savagery of yesterday’s slump – the 1.9% drop was equal to a 128.3 point slide in the index to 6,640.3 while the All Ordinaries lost 135.5 points, or 2%, to end the session at 6,710.6.
After hitting an all-time closing high of 6,845.1 a week ago today, the key index has fallen 205 points or 3%.
US futures in Asian and early European dealing had a 1% slide on Wall Street pencilled in.
After losing 2.6% on Friday the European Stoxx 600 index was down 1.4% in early trading on Monday night.
The Hong Kong market was off 2.7% and the Tokyo market slipped well over 1.4% and the Shanghai market lost 1.6%.
The ASX 200 index started sinking from the opening, first iron ore and copper stocks and then technology stocks tumbling.
The index ended the day with 178 of its 200 companies in red. The technology sector ended 5.2% lower, materials 2.8% lower while industrials shed 2.3%.
BHP shares fell 3.6% to $37.38, CSL fell 2.4% to $226.45, and Rio Tinto fell 3.5% to $91.49. Fortescue shares fell 7% to $7.09 and is at three-month lows, down 14.4% since last Wednesday
Appen lost 10.6% at $26.87, Bellamy’s closed 6.8% lower at $9.12, Afterpay Touch dropped 7.8% and WiseTech shares dropped 8% to $29.30.
There was no support from the big banks, the traditional area of strength for the ASX 200.
ANZ shares fell 1.7% to $27.31, Westpac shares lost 1.2% to $28.47, NAB dropped 1.3% to $28.15 and Commonwealth Bank declined 0.8% to $81.21 ahead of its full-year results tomorrow.
Of the gold miners, Resolute Mining shares jumped 4.3% to close at $1.94 while Evolution Mining was up 1.9% to $5.25.
Copper gold miners took a whack – Newcrest (which is more of a gold miner) saw its shares off 1% to $36.29. Copper saw its biggest fall in 11 months last week and OZ Minerals which is more a copper than gold miner, saw its shares lose 4.6% to $9.46.
