Trade concerns have wiped close to $50 billion worth of market capitalisation from Australian stocks this week, with investors trading cautiously as the US threatened to impose more tariffs on China. The S&P/ASX 200 index closed the week down 175.7 points, or 2.8 per cent, to 6143.8, its worst five-day performance since February.
Concerns that US President Donald Trump would further jeopardise the country’s already tense relationship with China by imposing more tariffs on its exports shook global markets and commodities this week. The Bloomberg Commodity index fell by as much as 1.2 per cent this week, hurting local mining stocks. BHP was one of the biggest drags on the market this week, due to the trade threats and weaker commodity prices. The miner also traded ex-dividend on Thursday, its shares falling 5.8 per cent to $31.30 this week.
Weakness in the US technology sector was felt this week. Facebook and Twitter chiefs appeared before the Senate Intelligence Committee this Wednesday, causing a sell-off of US tech stocks with fears that they could face increased regulatory pressure. This caused Australian tech stocks such as Appen, which counts eight of the top 10 tech giants including Apple, Facebook, and Google as clients, to fall.
Appen closed 10.4 per cent lower at $13.74 although it wasn’t the worst performing IT stock this week. NEXTDC fell 15.8 per cent to $5.97, Afterpay Touch closed the week 17.3 per cent lower at $15.00 and Xero went down 9.4 per cent to $46.27.
ANZ and Commonwealth Bank raised their variable interest rates this week, blaming increasing funding costs for the move. ANZ announced on Thursday it would raise its variable home loan interest rates by 16 basis points and CBA quickly followed suit, announcing it would increase its own rates by 15 basis points. The announcements came a week after Westpac raised its variable interest rates by 14 basis points. NAB is now the only one of the four majors yet to announce an increase. ANZ shares closed the week 3.7 per cent lower at $28.40, while Commonwealth Bank shares closed at $70.51, down 1 per cent.
Northern Star Resources was the best-performing stock on the index this week, rising 17.5 per cent to $8.18. The gold miner returned from a trading halt on Monday announcing it had successfully completed a placement to institutional investors, allowing it to fund its $US260 million acquisition of the Pogo gold mine in Alaska.
Morgan Stanley retained its ‘overweight’ rating on Resmed and upgraded its price target to $17.60, citing good Australian dollar-related tailwinds, ongoing strength in Australian health care growth, resilient long-term gross margin expectations and an underutilised balance sheet. Despite performing well this year already, the broker believes that there is more growth left in the company. One of the biggest factors behind the upgrade is the easing gross margin pressure from a softer US CMS competitive Bidding stance and a weaker US dollar against the euro driving the benefit of the higher-gross margin European region contribution. The broker is projecting that Resmed’s gross margin will lift from 58.2 per cent in 2018 to 58.6 per cent at the end of 2019.
**What moved the market**
The price of aluminium fell on Thursday, even as most other base metals lifted, as Rusal increased it aluminium exports by 7 per cent in August. Interfax news agency reported that Rusal, the world’s second-largest aluminium producer exported 281,000 tonnes of aluminium last month, even as it stares down the barrel of US sanctions, set to be introduced in late October. Rusal claimed that the number, which was provided by Russian Railways, did not take into account real sales and a range of other factors, although they declined to provide their own figures. On Thursday, the price of aluminium fell by 1.4 per cent to $US2,040 a tonne.
The Russian ruble has fallen to a fresh two-and-a-half year low against the US dollar as the threat of further sanctions against the country rise. The threat comes as police in the United Kingdom say they have identified two Russian they say are responsible for the Novichok attack on former Russian spy Sergei Skripal earlier this year. The United States has already imposed a number of sanctions on Russia in the past few years in response to the country’s actions in Ukraine and US election meddling. Earlier this year, the US dollar had been buying ₽55.91 but is now buying close to ₽70..
The Australian dollar had a jittery day of trading on Friday as the threat that the US would impose further tariffs on China loomed. The Aussie had been trading just shy of US72¢ during the early morning but fell as the day wore on, plummeting particularly after midday as traders sought defensive positions ahead of the expected announcement after 2pm. With no news or announcement forthcoming, the Aussie dollar lifted cautiously in the few hours that followed, recovering from a low near US71.58¢. It plummeted again just before the market close, however, falling below US71.49¢.