ASX gains despite turbulent trade war week
The Australian sharemarket rose 0.5 per cent for the week, delivering its best performance in four weeks.
The ASX was steady on Friday despite news that the Trump Administration was threatening to triple proposed tariffs against China to $US150 billion. At the close, the S&P/ASX 200 index was down just 0.1 points to 5788.7 and flat in percentage terms.
The S&P/ASX200 closed little changed on Friday but was up 0.5 per cent for the week.
Photo: Peter BraigCSL and Commonwealth Bank were the biggest drags on the index. CSL dropped 0.8 per cent to $157.99 and CBA fell 0.4 per cent to $73.49.
BHP and Woodside Petroleum were among the gainers, with the shares rising 0.5 per cent to $28.64 and 1.1 per cent to $30.11, respectively.
Lithium miners were strong in early trade on the back of improved lithium prices. Galaxy Resources rose 5.2 per cent to $3.04, while Orocobre gained 5.7 per cent to $5.01.
Myer had a positive day, with investors reacting to reports that South African company Woolworths Holdings was interested in acquiring the embattled department store. Myer finished the day up 7.3 per cent to 37¢.
Retail Food Group maintained its erratic trading pattern, losing 3.8 per cent to 89.5¢ to be the worst performer on the index.
Blue Sky gained 1.4 per cent to $5.70 following news on Friday that directors have been buying shares on market. The positive result ended four days of losses during which its value dropped more than 50 per cent.
The Australian dollar dropped off from Thursday's closing price of US76.8¢. It finished just lower on Friday at US76.7¢.
Asian markets reacted to President Donald Trump's latest trade war threat with Japan's Nikkei 225 index down 0.4 per cent, while Hong Kong's Hang Seng jumped 0.9 per cent on Friday afternoon. China's markets were closed due to a holiday.
Stock watch
Aristocrat Leisure
Despite a recent court case in Washington State ruling that Aristocrat Leisure-owned app Big Fish Casino could be considered "illegal online gambling" Citi analysts remain optimistic the company will be unaffected. The Ninth Circuit of the US Court of Appeals made the decision because it was of the opinion that app's virtual currency could be transferred between players and therefore had value. A court case on the app had previously been dismissed and analysts believe that the decision will be overturned on appeal. Citi described the decision against Aristocrat, the largest gambling machine manufacturer in Australia, as "hard to fathom" given the app is a free-to-play service. Citi retain its "buy" rating and are predicting a target price of $32.20 with an expected total return of 38.7 per cent.
What moved the market
Earnings growth
US fiscal stimulus is helping to "supercharge" earnings momentum according to BlackRock, which says that the earnings trend makes for the healthiest global earnings outlook across the globe since the post-GFC bounce. This global growth is providing a solid foundation for equities both in the US and in emerging markets. The US tax and spending plans have helped increased earnings growth which were already gaining momentum on the back of economic strength. Dividend payouts and share buybacks in the US are also helping to support strong growth as companies take advantage of President Trump's tax plan.
Ore and war
President Trump's shock announcement that the US was considering tripling tariffs is expected to reverse commodity trends. Iron ore prices in particular were expected to recover on Friday before news of President Trump's announcement. Easing trade tensions in recent days had allowed iron ore to begin to make a recovery after its price had fallen throughout the past month. But the surprise escalation by President Trump on Friday morning meant that the recovery was short lived. Iron ore is leveraged against global growth and trade war tensions have threatened to damage that growth in recent weeks.
Yen
The latest threat to global trade has helped to grow the Japanese yen as investors look for a safe haven. The value of the yen had been falling since Monday as it was markets became more confident that a trade tensions between the US and China would ease. One of the few winners of President Trump's announcement, the yen was sitting at 107.14 per dollar on Friday, up 0.2 per cent immediately following President Trump's trade war escalation. At its highest value on Friday, the yen was sitting at 107.02. A safe haven currency, the yen attracts demand during economic uncertainty. Japan's Nikkei 225 index was down 0.4 per cent on Friday.
Myer
Shares in Myer rose on Friday driven by speculation that the department store was being linked with a takeover bid. David Jones, which is owned by South African company Woolworths Holdings, was reportedly interested in acquiring the department store. Woolworths Holdings denied the interest on Friday, saying that the rumours had no basis and that there had been no discussions regarding an acquisition between the two companies. The company has faced hardships in recent years, falling out of the S&P/ASX 200 index in March. Myer closed on Friday up 7.3 per cent at 37¢.