Australia Market falls 1% on trade worries

Headline stocks of the Asia market finished session at one-month low on Wednesday, 5 September 2018, as risk aversion selloff triggered on worries about a possible escalation of trade tensions between US and China, shrugging off data showing the domestic economy grew faster than expected last quarter. Most of ASX sectors declined, with shares of materials and resources companies being notable losers, hit commodity prices. The benchmark S&P/ASX200 index ended down 62.7 points, or 1%, at 6,230.4 points, while the broader All Ordinaries index was down 59.7 points, or 0.93%, at 6,339.2 points.

Sigma Healthcare was among the best performers ahead of its first-half results on Thursday. Orocobre was the worst after saying that Argentina's export tax will equate to a levy of about 8% of its local venture's export sales revenue.

 

Shares of materials and resources companies suffered heavy losses amid pullback in commodity prices. The threat of a trade war escalation was felt particularly in the commodities market, with base and precious metal prices falling across the board on Tuesday. BHP Billiton fell 2.7% to A$32.20, wiping 10.5 points from the benchmark index alone. Rio Tinto also fell, down 2.4% to A$69.68. Of the smaller miners, South32 shares fell 2.3% to A$3.39, St Barbara was 4.6% lower at A$3.77 and Independence Group went down 4.8% to A$4.01.

Shares of banks also closed lower, led by Westpac, down 1.3% to A$27.94, after ASIC fined A$35 million over dodgy loans it issued between December 2011 and March 2015. Commonwealth Bank, the second-worst performing of the big four, fell 0.9% to A$70.11, while NAB suffered the least, down 0.7% to A$28.03.

Shares of energy sector inclined, crude oil as prices remained relatively steady overnight despite threats of a trade war and the strengthening US dollar. The price of NYMEX light sweet crude lifted 0.1% to $US69.87 a barrel on Tuesday as Tropical Storm Gordon heads toward the US Gulf of Mexico, putting offshore oil production at risk. Santos shares rose 0.6% to A$6.76 and Caltex Australia advanced 1.4% to A$30.15.

ECONOMIC NEWS: Australia services activity eases further in August-- Australia's services activity continued to deteriorate to its survey-low figure in August with the rate of business activity expansion slowing for the third straight month. The Commonwealth Bank of Australia Services Business Activity Index on a seasonally adjusted basis was down further to 51.8 in August from 52.3 in July, lowest since the survey began in May 2016. Moreover, Australia's Commonwealth Bank Composite Output Index on a seasonally adjusted basis declined further to survey low level of 52.0 in August from 52.3 in July.

Australia grew 0.9% in Q2 The Australian economy grew 0.9% in seasonally adjusted chain volume terms in the June quarter 2018, according to figures released by the Australian Bureau of Statistics (ABS).

Chief Economist for the ABS, Bruce Hockman, said: Growth in domestic demand accounts for over half the growth in GDP, and reflected strength in household expenditure. Domestic demand increased 0.6% for the quarter, driven by a 0.7% growth in household consumption, with increased expenditure on both discretionary and non-discretionary goods and services. General government final consumption expenditure increased 1.0% in the June quarter. Public investment remained at elevated levels reflecting continued work on infrastructure projects across the nation. Investment in new dwellings increased 3.6% for the quarter. with strength observed in Victoria and South Australia. This strength was reflected in the Construction industry, which grew 1.9% for the quarter. Compensation of employees (COE) grew 0.7% for the quarter due to rises in the number of wage and salary earners and wage rates. COE growth was prominent in the Health Care and Social Assistance industry.

Australia AiG services index slips in August-- Australia's service sector growth grew at a slower pace in August, Australian Industry Group said with a Performance of Services Index score of 52.2. That was down from 53.6 in July. Individually, stocks, sales, new orders and employment all continued to expand but at a slower rate. Deliveries moved from contraction to expansion.

CURRENCY: Australian Dollar eased against greenback and other major currencies on Wednesday. The Aussie dollar was buying 71.74 US cents, down from 72.05 US cents on Tuesday; 79.96 Japanese yen, from 80.23; 62.02 euro cents, from 62.22; 55.90 British pence, from 56.09; and 109.57 NZ cents, from 109.47.

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