Aussie market slumps as trade tensions rise

MORE than $45 billion has been stripped from the value of companies on the Australian share market in the biggest selling spree for two months.

The benchmark share index, the ASX 200, fell 2.2 per cent yesterday, its steepest fall for any day since October 3.

The tumble came just days after the index notched up a record high close, at 6864 points, having rallied more than 7 per cent since mid August.

Share prices fell heavily in morning trade after US president Donald Trump surprised markets the previous night, flagging plans for fresh import taxes on goods from Brazil and Argentina.

Then, adding to the downward pressure in afternoon trade, the Reserve Bank released a statement on interest rates that, according to Westpac economist Robert Rennie, was “arguably a bit more upbeat” than in previous months.

Meeting for the last time this year, the RBA board opted to keep the cash rate on hold at 0.75 per cent, as expected.

But Mr Rennie said the statement from governor Philip Lowe that announced the decision was more optimistic.

“The overall tone of the RBA statement was arguably a bit more upbeat than previous months, noting the ‘outlook for the global economy remains reasonable’ (and) ‘the Australian economy appears to have reached a gentle turning point’,” Mr Rennie said.

But he cautioned that Westpac was still forecasting two rate cuts and the launch of quantitative easing, a stimulus program.

CommSec analyst Steven Daghlian said China’s response to US support for antigovernment protesters in Hong Kong has also weighed on sentiment.

“Markets are extremely sensitive to any good or bad news on the US-China dispute front, but also the US relationship with other nations as well,” Mr Daghlian said.

China had announced on Monday that US military ships and aircraft wound not be allowed to visit Hong Kong.

It also announced sanctions against several US organisations for encouraging protesters to “engage in extremist, violent and criminal acts”.