ASX dips amid rising US-Europe trade tensions; gold hits record high

The Australian sharemarket started the week in the red amid investor caution over the escalation in trade tensions between the US and Europe, after US President Donald Trump threatened to increase tariffs as part of his push to acquire Greenland.

The S&P/ASX200 fell 29.20 points or 0.3 per cent on Monday to 8874.50, partly reversing last week’s five-day winning streak. As shares dropped around the region, gold and silver both jumped to record highs, while oil flatlined on concerns about what a possible trade war between the US and Europe could mean for global growth and demand.

Australian closed lower, dragged down by tech stocks and the big banks.Credit: Getty Images

The decline came after Trump announced tariffs on several European nations over the weekend, threatening even higher duties if Europe doesn’t give in to his ambitions to acquire Greenland for the United States, Capital.com market analyst Kyle Rodda said.

“US President Trump’s actions over the weekend have inflamed geopolitical risks while also reintroducing trade uncertainty,” Rodda said.

Technology was the weakest sector on the bourse as investors adopted a more cautious stance, with logistics software business WiseTech (down 4.4 per cent), accounting software firm Xero (down 2.6 per ent) and tracking business Life360 (down 7.5 per cent) all in the red.

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Banking giants, which are a key influence on the overall market, also lost ground. Commonwealth Bank shed 0.7 per cent, National Australia Bank fell 1.1 per cent, Westpac fell 0.6 per cent and ANZ Bank lost 0.4 per cent.

The iron ore giants were mixed, with BHP falling 0.5 per cent, Fortescue losing 1.9 per cent and Rio Tinto moving 0.8 per cent higher.

Gold hit a new all-time high above $US4690 ($7018) an ounce, lifting ASX-listed producers such as Northern Star (up 3.2 per cent), while Evolution gained 3.1 per cent and US-headquartered Newmont rose 1.4 per cent higher.

The strongest sector on the bourse was utilities, with Origin Energy (up 1 per cent), AGL Energy (up 0.8 per cent) and pipeline business APA Group (up 1 per cent) all moving higher.

Energy stocks were mixed, with oil and gas giant Woodside gaining 0.3 per cent while Santos fell 0.4 per cent, as the price of oil stabilised amid cooling tensions over Iran.

US stock futures slid on Monday, though a holiday in US equity and bond markets made for thin trading and probably contributed to the 0.9 per cent drop in S&P 500 futures and a 1.1 per cent fall in Nasdaq futures.

In response to Trump’s comments over Greenland on the weekend, major European Union states decried the tariff threats over Greenland as blackmail. France proposed responding with a range of previously untested economic countermeasures.

The EU’s options include a package of its own tariffs on €93 billion ($161.7 billion) of US imports that was suspended for six months in early August, and measures under an Anti-Coercion Instrument that could hit US services trade or investments.

Analysts at Deutsche Bank noted European countries owned $8 trillion of US bonds and equities, almost twice as much as the rest of the world combined, and might consider bringing some of that money back home.

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“With the US net international investment position at record negative extremes, the mutual interdependence of European-US financial markets has never been higher,” said George Saravelos, Deutsche’s global head of FX research.

“It is a weaponisation of capital rather than trade flows that would by far be the most disruptive to markets.”

The Australian dollar was trading at US66.97¢, down from US67.02¢ on Friday at 5pm.

In Wall Street’s final session of last week the S&P 500 fell 4.46 points, or 0.1 per cent, to 6940.01. It is sitting just below its record, which was set early last week. The Dow Jones Industrial Average fell 83.11 points, or 0.2 per cent, to 49,359.33. The Nasdaq composite fell 14.63 points, or 0.1 per cent, to 23,515.39. Each index notched weekly losses.

Smaller company stocks fared better. The Russell 2000 eked out a 0.1 per cent gain, while also notching a 2 per cent gain for the week.

Technology stocks were the strongest forces behind the market’s moves throughout most of the day. Several big technology stocks made strong gains and helped offset losses elsewhere.

Broadcom rose 2.5 per cent and Micron Technology rose 7.8 per cent. The semiconductor companies are among several big-tech companies with outsized valuations that often push the market higher or lower.

A handful of regional US banks reported their earnings following mixed reports from their larger peers. Pittsburgh’s PNC jumped 3.8 per cent after it beat Wall Street’s fourth-quarter targets but Regions Financial fell 2.6 per cent after reporting results that missed forecasts.

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