The United States and China went ahead with their additional tariff increases on each other's goods on Sunday, 01 September 2019, despite multiple indications last month of a possible breakthrough in trade negotiations.
The 15% US duty apply to about $112 billion of consumer goods ranging from footwear and apparel to home textiles and certain technology products like the Apple Watch. A separate batch of about $160 billion in Chinese goods including laptops and cellphones will be hit with 15% tariffs on 15 December 2019. The Trump administration has also announced that existing 25% tariffs on a separate group of $250 billion of Chinese imports will increase to 30% on 1 October 2019.
China's retaliation also took effect on Sunday, with higher tariffs being rolled out in stages on a total of about $75 billion of US goods. Higher Chinese duties that took effect 1 September include an extra 10% on American pork, beef, and chicken, and various other agricultural goods, while soybeans will get hit with an extra 5% tariff on top of the existing 25%. Starting in mid-December, American wheat, sorghum, and cotton will also get a further 10% tariff. While China imposed a new 5% levy on US crude oil starting from September, there was no new tariff on liquefied natural gas. The resumption of a suspended extra 25% duty on US cars will resume 15 December 2019, with another 10% on top for some vehicles. With existing general duties on autos taken into account, the total tariff charged on US-made cars would be as high as 50%.
China's official manufacturing purchasing managers' index, which looks at larger, state-owned companies, showed the sector shrank for a fourth consecutive month in August as the trade war piled pressure on the economy. The Purchasing Managers' Index (PMI) fell to 49.5 in August, China's National Bureau of Statistics said on Saturday, versus 49.7 in July, below the 50-point mark that separates growth from contraction on a monthly basis. However, private survey on China's manufacturing sector, Caixin/Markit Manufacturing Purchasing Managers' Index for August was at 50.4.
Energy producers have followed oil prices lower with the US Nymex price falling by 2.8% on Friday in US trade. Woodside (WPL) and Santos (STO) were both easing at least 1%.
Shares of banks and financials went down. The Commonwealth Bank fell 0.5% and Westpac was down 0.6%. Both National Australia Bank and ANZ were down 0.6%.
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Consumer staple stocks were also lower, with Woolworths and Wesfarmer both lower by 1.8% and 1.2% respectively.
Telcos were weighed by a decline in Telstra (TLS), down 1.8% afterAustralia's largest telco lowered its earnings (EBITDA) and total income guidance for the year ahead due to a slower than expected roll-out of the nbn network.
Materials and resources shares continued to be the best performing sector today, with Nickel miners led the sector after the price of the metal lifting on supply concerns as Indonesia, a major producer of nickel, looks to ban ore exports from December. Among miners, Western Areas (WSA) and Independence Group (IGO) were up by as much as 9%. Heavyweights BHP Group (BHP) and Rio Tinto (RIO) were also both higher by as much as 1.5%.
Chemical and explosives firm, Incitec Pivot (IPL) fell as it lowered earnings guidance for FY20 with EBIT forecast falling to a range of A$285-295 million from a previous guidance of A$370-$415 million due to impacts to its fertiliser business due to drought conditions on the East Coast of Australia. IPL is also considering a potential sale or demerger of its fertiliser business and is launching a strategic review.
CURRENCY NEWS: The Australian dollar declined against greenback on Monday. The Australian dollar was at $0.6727 after slipping from highs above $0.676 last week.
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