Markets tumble in trade battle

AUSSIE shares have been hammered in a two-day rout that has wiped $85 billion from the value of the nation’s biggest companies.

The dramatic sell-off follows a plunge on global markets triggered by a sharp escalation in the tit-for-tat USChina trade war.

Yesterday’s ongoing dive came as the Reserve Bank kept interest rates on hold but warned it was ready to cut again amid a weaker than expected domestic economy and “increased uncertainty” on the global front.

The nation’s key share market benchmark, the ASX 200, dropped 2.4 per cent yesterday to close at 6478.09 points.

It was the biggest sell-off for the year and the worst one-day fall since October last year.

It followed Wall Street suffering its biggest one-day fall for 2019 yesterday amid fears China is devaluing its currency to offset the impact of a new round of US tariffs.

The US ramped up the pressure yesterday, designating China a currency manipulator and saying it will seek corrective action from the International Monetary Fund.

A weaker Chinese currency against the US dollar makes its exports to America cheaper, offsetting the impact of tariffs.

High-flying tech stocks including Xero, WiseTech Global and After Pay Touch suffered the biggest falls on the local market yesterday but blue-chip favourites did not escape unscathed.

All the big banks were down, Telstra lost 2.5 per cent to $3.83 while Qantas Airways gave up 2.6 per cent to $5.53.

Yesterday’s losses add to the 1.9 per cent drop the ASX 200 suffered on Monday.

The market has fallen every day since hitting a record high a week ago but remains 15 per cent above where it started the year.

A DRAMATIC two-day selloff triggered by a tit-for-tat escalation in the US-China trade war has wiped $85 billion from the Australian share market.

A day after sliding 1.9 per cent, Australia’s benchmark share index spiralled another 2.4 per cent yesterday in its biggest single-session fall since last October.

It came as the Reserve Bank kept the cash rate on hold but warned it was ready to cut further amid weaker than expected economic growth and “increased uncertainty” on the global front.

Investors also worked through a flurry of economic updates, including a record trade surplus on the back of high iron ore prices and a fall in the 10-year bond rate below 1 per cent for the first time.

The hit to the Australian bourse comes just a week after it clawed its way to an all-time high, finally throwing off its hangover from the global financial crisis.

“What has been driving markets over the past year is the ultra-low interest rate policies of central banks and concern about the trade war between the US and China — it is almost a push and pull,” Burman Invest portfolio manager Julia Lee said.

“The extra tariffs that the US is going to impose on China and China’s retaliation with the devaluation of its currency has escalated the concerns around global growth.”

The 2.4 per cent fall in the ASX 200 left the index at 6478.09 points. It came after Wall St suffered its biggest one-day fall so far this year overnight on Tuesday amid fears China is devaluing its currency to offset the impact of a new round of US tariffs.

In a good sign for investors, China took steps to support the value of the yuan late yesterday afternoon.

“Although we remain of the view that a deal will be reached, the risk has increased,” AMP Capital chief economist Shane Oliver said.

“Share markets may need to fall further in the short term to remind both sides of the need for a deal and get them talking again.”