Australia Market falls on US-China trade worries, Rio profit miss, and soft commodity prices

Headline indices of the Australia stock market closed down on Thursday, 02 August 2018, as risk sentiments dampened by tracking fall in US markets overnight amid tensions over a possible escalation of the trade conflict between the United States and China. Most of ASX sectors declined with sentiment soured in the materials sector due to Rio Tinto's first-half earnings miss, while energy stocks declined after plunge in crude oil prices overnight as a surprise increase in U.S. crude stockpiles fed concerns about global oversupply. At the close, the benchmark S&P/ASX 200 Index fell 27.02 points, or 0.43%, to 6,248.70. The broader All Ordinaries Index was down 26.25 points, or 0.41%, to 6,335.90.

Investors are worried about US-China trade war after Washington said Wednesday it may jack up the tariff rate on the next $200 billion in Chinese imports it plans to target as it pressures Beijing to reform its trade practices. US Trade Representative Robert Lighthizer said President Donald Trump asked him to consider increasing the proposed tariffs to 25% from the planned 10%.

 

Shares of materials sector were the biggest drag to the benchmark, with Rio Tinto lost more than 3% to hit its lowest in over two weeks, after the global miner reported first-half underlying earnings that fell short of market expectations. RIO lifted its Net Profit by 33% year on year to US$4.38 billion with underlying earnings of US$4.42 billion, a rise of 12%. The figures were slightly below market expectations and higher costs also weighed on the result. BHP led the losses with a 2% fall.

Shares of banks and financial companies were make a hefty contribution to the S&P/ASX 200, helped cap the broader declines. Westpac Banking was the biggest lift, followed by Commonwealth Bank of Australia and Suncorp Group.

ECONOMIC NEWS: Australia's trade balance was a surplus of $1.87 billion for June, marking a substantial increase from the $725 million surplus recorded in May. Over the month, exports lifted by 3% while imports were a touch weaker by 1%.

CURRENCY NEWS: The Australian dollar was tad lower against greenback and other major currencies, amid an escalation in the trade war between the United States and China. The Australian dollar was at 74.01 US cents, slightly down from 74.07 US cents on Wednesday.

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