ASX 200 update: Five weeks of gains end as US-China trade war ramps up

The ASX 200 fell last week – breaking a five-week winning streak – as political shocks became economic and financial shocks.

Australia’s stock exchange is tipped to dip at open today, following a slight decline in the US indices (Dow Jones 0.25%, S&P 500 0.5%) at the end of last week amid increasing trade tensions between the US and China.

Last week, the All Ords ended the week 0.22% lower at 6,824, points as the telecommunications and materials and mining sectors shed 2.91% and 1.89% respectively. 

However, companies in the information technology and consumer discretionary industries grew almost 1% in value across the board as the leading sectors last week.

What shares went up last week on the ASX?  

The week’s biggest positive mover was buy-now-pay-later company Afterpay Touch Group Ltd (APT), which jumped 10.6% after it notified the market that an interim auditor’s report into its handling of possible anti-money laundering and counter-terrorism financing activity on its systems had been handed to the regulator AUSTRAC. The company said it had not identified any transactions of that nature processed through the platform. A positive broker note also spurred the price rise. The small-transaction payment system’s share price has risen from $2.95 when it was first listed on the ASX in mid-2017 to its current price of $36.55.

Retailer Premier Investments Limited (PMV) continued its climb last week. This follows its annual results and positive outlook two weeks ago. Its Smiggle children’s stationery brand is cited as a key global growth area for the company. The share price was up 8.1% to $19.59 by Friday’s close, and has risen more than 30% in the past month.

Financial services company IOOF Holdings Limited (IFL) has also increased its value more than 30% over the past month, including a 7.7% increase last week. The rises come after the Australian Prudential Regulation Authority (APRA) lost its case against the company in the Federal Court earlier this month, with Justice Jayne Jagot finding the regulator’s argument that IOOF had breached superannuation laws was “unpersuasive”.

There was also a change in sentiment for satellite company Speedcast International Limited (SDA), which had been among the worst performers on the market over the previous two weeks, following the announcement of a $175 million loss last year and the withdrawal of a major international investor. This week, its share price gained 7.3% to end the week at $1.26. It was reported on Friday that Mitsubishi UFJ Financial Group bought 13 million shares to take a 5.46% stake in the company. 

What shares went down last week on the ASX?  

The worst performer last week was gold miner Resolute Mining Limited (RSG), amid a global fall in the gold price. Its share price fell 11.2% to $1.47, buthas risen overall from $1.15 at the start of the year.

Metal and electronics recycling company Sims Metal Management Limited (SGM) lost 7.3%. Last month, it warned of a rapid deterioration in the ferrous and non-ferrous metals market, blaming the ongoing US-China trade war for its impact in reducing demand for aluminium and steel.

Big miners BHP Group, (BHP), Newcrest Mining Limited (NCM) and South32 (S32) also lost ground.

What’s happening this week in Australian economic news?

Cash rate cut could be on the cards

The monthly Reserve Bank of Australia meeting will be held tomorrow, with many economists tipping another cash rate cut, to a record-low of 0.75%.

Last week, Governor Dr Philip Lowe said there was considerable uncertainty in the Australian and global economies.

“The main message on the global economy is that while it is still growing reasonably well, the risks are increasingly tilted to the downside,” he said.

“The main source of these downside risks are geopolitical developments in many parts of the world.”

As of Friday, the ASX Rate Indicator – a measure of market sentiment about the likelihood of a cash rate cut – was steady at 78%. It was 82% the week before on 20 September. 

Data on Australia’s official terms of trade will be released on Thursday.

US-China trade war is back to bite, among international events to watch

There remains significant uncertainty around US-China relations. Yesterday, a US Treasury official clarified there were no current plans to block Chinese companies from listing in the US. This followed a report in Bloomberg that aides to President Trump were considering stopping Chinese companies from increasing their US exposure.

It followed political shocks last week for two of Australia’s closest allies. The UK Supreme Court ruled on Tuesday that Prime Minister Boris Johnson’s move to suspend the British Parliament was illegal, prompting a decline in the pound.

On the same day, US leader of congress Nancy Pelosi announced the Democrats would start impeachment proceedings against President Donald Trump, sparking the worst day in a month for New York’s S&P 500.

Economists and investors will be watching closely for continued fallout from these events. 

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About Rosanne Barrett: 

Rosanne Barrett writes stories that inform, entertain and inspire. She has had more than 15 years’ experience in daily news media across Australia and Hong Kong, including eight years as a staff reporter at The Australian. Ms Barrett produces journalism, content and copywriting across a range of industries.