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Trade war escalation sees ASX tumble

By Cameron Micallef · August 27 2019
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Eleanor Creagh
Trade war escalation sees ASX tumble

Trade war escalation sees ASX tumble

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By Cameron Micallef · August 27 2019
Reading:
egg
egg
egg
Eleanor Creagh

A fresh escalation of the trade tension between the United States and China has seen a renewed eagerness to bail out of Australian equities.

The S&P/ASX 200 index fell by nearly 1.7 per cent once trading had commenced on Monday.

The All Ordinaries also fell by 1.65 per cent, meaning investors had lost more than $34 billion during the day’s trading.

According to Saxo Capital Markets’ Australian market strategist, Eleanor Creagh, the Australian markets and the global economy are in a far more vulnerable position now than they were 72 hours ago. 

“Multiple geopolitical flashpoints have come to a head over the weekend just as the trade tensions ratcheted up another level in another tit for tat round of tariff increases from both the Chinese and US side,” Ms Creagh outlined.

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The impact on Australia has also been felt elsewhere, with markets across the Asia Pacific noting losses between 1.3 and 3.3 per cent. Hong Kong’s Hang Seng index had the heaviest falls, losing 3.3 per cent. 

Tokyo’s Nikkei fell by 2 per cent, while the Shanghai Stock Exchange fell by 1.3 per cent.

In the United States, the Nasdaq Composite fell by 239.62 points, or 3 per cent, as sharemarkets reacted to the news of a deepening trade escalations.

Ms Creagh said she was not surprised by the market’s reaction as investors brace for a possible market slowdown.

“Against this fragile backdrop, it is easy to see why risk assets are being pummelled, with Asian indices down across the board, and safe havens bid with gold climbing to a fresh six-year high,” she commented.

The strategist considered that investors should not be “leaning against the wind” and remain defensively positioned with overweight haven currencies including the yen, Swiss franc, gold and treasuries.

“Precious metals and gold miners will continue to outperform as investors seek out safe havens to stave off volatility,” she said.

“Mounting geopolitical tensions and the return of central bank largesse eroding the purchasing power of currencies around the world combined with collapsing real rates remain supportive of gold,” Ms Creagh concluded.

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