Global stocks took a back seat as additional tariffs on a further $US200 billion worth of Chinese goods were stated to be levied on the trade terms by the US igniting more tension. There could be significant pain for several companies and this could negatively impact supply chains across Asia especially in South Korea, Japan and Taiwan. However, initial reports pointed to the fact that tariffs may be more broad-based. Moreover, as the Chinese economy continues to rebalance towards domestic consumption and post growth rates above 6.0%, exporters might be able to redirect some of the lost export orders towards the domestic market, reducing the negative impact.
The tariffs announced by the US may be insufficient to start a trade war between China and the US per se as the cost might be manageable for the former. That said, a trade war is still a risk as a result of potential miscalculations from either China or the US. In fact, while indicating for the additional tariffs, Trump flagged to take more actions to have China change its unfair practices and work towards a balanced trade relationship.
A run-through of this week showed that equities more or less tumbled across the world amid the trade tensions, out of which most impact was seen in Asia whereas emerging market currencies and commodity prices came under pressure, lifted the swiss franc, yen and government bonds. Import tariffs are also likely to fuel inflation, as the US economy is already at full capacity, while further rate hikes are expected by the Fed over FY18 and FY19. Post the announcement on additional tariff, the S&P 500 ended 0.2 percent lower at 2,767 in New York, whereas the Dow Jones Industrial Average was 0.2 percent lower and again slipping into the negative territory for the year. The tech-heavy Nasdaq Composite shed 0.7 percent around June 20, 2018. The S&P/ASX 200 index was down by 2 points and reached at 6102.1 while All Ordinaries were down by 3.9 points and reached at 6208.9. As at June 20, 2018, Cboe Vix volatility briefly rose above 14 to its highest level. Euro Stoxx 600 index on the other hand ended 0.7 percent lower to end at 383.21 around June 19, 2018; and in London, the FTSE 100 fell by 0.4 percent. Coming to Asia, the Shanghai composite fell 3.8 percent, and the CSI 300 was down 3.5 percent. In Hong Kong, the Hang Sheng Index fell by 2.8 percent. Commodities including Brent Crude and LME Copper were all seen to witness a setback with Gold also easing to $1,269 by mid-week. The Shenzhen index went down about 5.8% as at June 19, 2018 with the additional threat from tariffs. Meanwhile, the Dow Jones Industrial Average lost all the gains it made in 2018. With this, there might be a reduced demand for precious metals and industrial products.
Australian market closed at a lower note mid-week with mining stocks witnessing a challenging time. Particularly, Rio Tinto (ASX: RIO) and BHP Billiton (ASX: BHP) fell at the back of losses at US listings. Towards the end of the week, the ASX has been trying to defy the downbeat trend, but ASX: BHP was still witnessing a losing streak by stock edging down to $ 32.74 around opening of trade. The stock has been down 2.38% in last five days. Same was the case with ASX: RIO, which lost 3% over the last five days. It would be key to watch that how these miners perform given the latest circumstances and any future developments.
The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkine.com.au and associated websites are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376). The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations.