Standby for a nasty day on the ASX after President Trump’s latest anti-China tariffs whacked Wall Street lower in the second biggest fall of the year so far overnight Thursday.
President Trump’s latest Chinese tariffs destroyed much of his claimed Wall Street ‘boom’ in 2018 as US stocks went into freefall in the closing hours of the session as investors reacted badly to the news of the President’s move.
Fearing that Donald Trump just lit the fuse to spark a global trade war, investors pushed the . The Dow Jones Industrial Average down more than 700 points after being down 500 points with half an hour to go.
US bond yields, one of the best indicators of fear and loathing among big investors saw their biggest fall since last September as the yield on the key 10 year security tumbled 7 points to 2.83%. That was driven by investors bailing out of shares and going to the safe haven of the biggest market in the world (it is in fact near cash).
Not even the fact that Trumps imposts were well-leaked in the past fortnight lessened the negative impact of the announcement by the White House.
The news also hit overnight trading on the ASX 200 futures market and the market is looking at a 90 point plunge at the opening this morning (after yesterday’s 13 point drop) and could very well go lower as other markets in Asia, especially in China open later and react badly to the Trump news.
The Aussie dollar fell to a three month low of 76.88 US cents in heavy selling early this morning, Sydney time and then recovered the 77 US cent level to be around 77.05 at 7.30am.
Gold rose again to more than $US1,335 an ounce while US oil futures fell more than 1.3% to around $US64.30 a barrel in New York.
Key US industrial and other shares (agricultural and tech) were hammered by resurgent protectionist fears.
The losses extended a day already full of heavy selling with the Trump administration’s latest tariff (on top of the earlier imposts on steel and aluminium) adding to investor concerns that the current solid global economic growth could be damaged by a trade war started by Trump.
The main Wall Street indexes saw their biggest one-day losses since February 8 when investors took fright at the January wages blip and sold off heavily (The Dow fell 1,033 points that day).
The Dow tumbled 724.42 points, or 2.9%, to 23,957.89 as financials and industrials shares were hit hardest.
The S&P 500 index dropped 68.24 points, or 2.5% to 2,643.69, with more than 90% of its 500 stocks ending lower. The index turned negative for the year.
And the Nasdaq Composite slumped 178.61 points, or 2.4% to 7,166.68.
The plan signed by Mr Trump on Thursday calls for tariffs on up to $US60 billion in Chinese imports in key strategic sectors identified by Beijing in its “Made in China 2025” plan.
The move is in response to what the Trump administration says has been a co-ordinated strategy by China to force US companies to hand over intellectual property to do business in the country.
The 10 sectors identified in that plan are: advanced IT products; automated machine tools and robotics; aerospace and aeronautical equipment; maritime equipment; modern rail equipment; electric and other “new energy” vehicles; power equipment; agricultural equipment; “new materials”; and biopharmaceutical and other advanced medical products.
A specific list of products to be hit with the tariffs is due to be presented within 15 days. Not likely to be included are many consumer electronics products, such as iPhones which would have been a real political headache for the administration and highly inflationary.
They would have also upset giant companies like Apple with their well connected billions in lobbying power. As it is one of the biggest victims is Boeing, an enthusiastic supporter of Trump’s tax cuts and the best performed stock in the S&P 500 in 2017 when the shares were up 93%.
Boeing shares fell 5.2% and are down more than 10% in the past month, but remain 8.4% up year to date. That gain will disappear in another session or two like we saw Thursday.
