Markets Live: ASX frets after US vows $US60b of China tariffs
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The fortunes of the world's 500 richest people tumbled $US71 billion on Thursday as markets plunged on heightened prospects for a trade war.
Berkshire Hathaway chairman Warren Buffett led with a $3.02 billion decline, followed by $3.01 billion for Amazon.com's Jeff Bezos. Tencent Holdings's Ma Huateng lost $2.16 billion, the most among Asia's richest.
Just 52 of the world's 500 richest people added to their net worth on the day, as the Dow Jones Industrial Average sank more than 700 points, according to the Bloomberg Billionaires Index. The S&P 500 Index fell 2.5 per cent, the most in six weeks.
The trade wars have officially started. The question moving forward is how far and quickly they will escalate, IG Markets says.
On the encouraging side of this constant concern for the past few months is that a range of exemptions were reported for the United States' blanket steel and aluminium tariffs.
Most notable in the list was the European Union. Had the US imposed its tax on the world's largest collective economy, there were already plans on both sides for further escalation that would have rippled throughout the global markets.
Yet, where Europe sighed a breath of relief, China felt the burden of its long-standing trade surplus with the US. Trump announced steps to impose a $US60 billion tariff on China and limit the country's ability to invest in the United States technology sector.
In the upcoming session, the 15-day grace period granted for the metals tariffs is due to end. It is highly likely that China will feel the pinch from this tax as well – as will many other smaller countries who have little leverage to negotiate for favour.
As we look forward, how aggressively these countries respond to their counterparts' actions will determine how quickly this situation will weigh on the globe.
ANZ economists note that US President Trump's proposed $US60 billion of tariffs against Chinese imports to the US will target aerospace, information and communication technology and machinery at 25 per cent.
Trump said "this is the first of many" while signing the order and China has said it will respond with "measured and proportional" levies on the US, ANZ notes.
That's expected to include imports of US automotive, soybean, aircraft and computer chips to China, the economists say.
"Agriculture is considered a likely target because it's one of the few sectors where America has a trade surplus with China and it's a sector weighted towards Trump's support base."
Australian shares are poised to drop heavily at the open after US stocks put in their worst one-day performance since early February.
Traders reacted to the news that US president Donald Trump has vowed to hit China with up to $US60 billion of economic measures and ASX futures were 89 points, or 1.5 per cent, lower at 7.30am AEDT.
All three major US benchmarks tumbled in the final hour of trade. The Dow shed 724 points or 2.9 per cent to 23,957 to end below the 24,000 mark and near its February low, while the S&P 500 slid 2.5 per cent and the Nasdaq ended down 2.4 per cent.
Pacing the drop in the Dow were a 5.7 per cent drop in Caterpillar, a 5.2 per cent drop in Boeing and a 4.7 per cent drop in 3M.
The Australian dollar retreated 0.8 per cent as the US dollar rebounded. The yield on the 10-year US Treasury note dropped to 2.83 per cent.
The pan-European STOXX 600 index fell 1.6 per cent to its lowest level in more than two weeks, while Germany's exporter- and industrials-heavy DAX fell 1.7 per cent.
The mood was also dampened by a weaker than forecast business activity survey after euro zone businesses rounded off the first quarter of 2018 with their slowest growth in over a year.
Meanwhile, hard on the heel's of the Fed's interest rate hike on Wednesday, the Bank of England moved closer to raising interest rates as early as May after keeping its benchmark unchanged at 0.5 per cent on Thursday.
Hong Kong stocks extended losses to end lower on Thursday, hurt by a slump in shares of IT companies as trade war worries dented sentiment in Asia as well.
Trader Peter Tuchman works on the floor of the New York Stock Exchange.
