Risk sentiment was hurt due to worries that a prolonged U. S.-China trade war and Washington's tariff threat to Mexico could derail the global economy. On Friday, the Trump administration eliminated India's ability to export products to the US duty-free. Further, President Trump threatened to impose tariffs on Mexico over immigration.
A senior Chinese official said on Sunday that United States cannot use pressure to force a trade deal on China, refusing to be drawn on whether the leaders of the two countries would meet at the G20 summit to bash out an agreement. China threatened on Friday to unveil an unprecedented hit-list of unreliable foreign firms, groups and individuals that harm the interests of Chinese companies, as a slate of retaliatory tariffs on imported U. S. goods.
With the US and China set for a long drawn out trade war, the markets have begun pricing the possibility the Federal Reserve will cut its target rate by a half-percentage point by year-end. Goldman Sachs also sees a higher chance of rate cut but believes it is a close call as the economic outlook has not changed much.
Data from a private survey on Monday showed that Chinese manufacturing activity was better than expected in May. The Caixin/Markit factory Purchasing Managers' Index for May was 50.2.
The PMI reading for April was 50.2. PMI readings above 50 indicate expansion, while those below that signal contraction. Last week, China's official manufacturing PMI for May came in at 49.4, lower than April's reading of 50.1. The official non-manufacturing PMI for May was 54.3 unchanged from April.
Shares of materials and energy declined as prices of commodities such as iron ore and copper declined amid doubts about the demand for resources. Oil and gas players Santos, Woodside Petroleum and Oil Search gave up between 2.4% and 2.6%, while global mining majors BHP Group and Rio Tinto were also 1.8% lower, each.
Shares of banks and financials were lower. The big four banks - National Australia Bank, Commonwealth Bank and Westpac - were down in a range of 0.2 percent to 0.8 percent.
ANZ Banking shed 1%. ANZ Banking said it has completed the A$2.85 billion sale of its Australian life insurance business, OnePath Life, to Zurich Insurance Group. The bank's shares are lower by 0.7%.
BUcking the trend, Eclipx Group was up 22.8%. The firm scored an upgrade from Credit Suisse, with the broker lifting its rating to outperform from neutral.
ECONOMIC NEWS: The latest survey from the Australian Industry Group revealed that the manufacturing sector in Australia continued to expand in May, albeit at a slower rate, with a Performance of Manufacturing Index score of 52.7. That's down from 54.8 in April, although it remains well above the boom-or-bust line of 50 that separates expansion from contraction.
CURRENCY NEWS: The Australian dollar was down against the U. S. dollar on Monday. The Australian dollar changed hands at $0.6954 after dropping to levels around $0.690 last week.
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