Related Articles
The S&P/ASX 200 has faced a sharp decline today, dropping 152.70 points, or 1.79%, to 8,379.60 (as of 2:17 pm AEDT). This comes after the index reached a new 52-week high. The worst-performing stocks include Westgold Resources Limited, down 12.40%, and Fisher & Paykel Healthcare Corporation Limited, down 7.25%. Although the index has lost 0.35% in the past five days, it still sits 2.19% below its 52-week high.
Figure 1: ASX Performance on February 3rd, 2025
Australia Stock Sector Performance
The performance across all 11 ASX sectors has been largely negative, reflecting a broader market downturn:
- Energy: -0.98%
- Telecommunications: -0.99%
- Real Estate: -1.43%
- Staples: -1.53%
- Information Technology: -1.54%
- Utilities: -1.64%
- Financials: -1.74%
- Industrials: -1.87%
- Health Care: -1.89%
- Materials: -2.17%
- Discretionary: -2.26%
The downturn is primarily due to concerns surrounding trade wars, particularly after tariffs were announced by the US, triggering fears of global economic instability.
Stock Market Reactions
Among the biggest gainers today are companies such as Lynas Rare Earths Ltd (up 3.00%) and Imugene Ltd (up 2.78%). On the other hand, companies like Energy Resources of Australia Ltd and Westgold Resources Ltd experienced significant losses, with ERA down 16.67% and WGX down 12.40%.
Investor sentiment has turned cautious, as seen with falling stock prices across various sectors. These market movements come amid broader fears of global trade disruptions.
Impact of US Tariffs on Global Markets
The fallout from US President Donald Trump’s tariffs is sending shockwaves through global markets. Although the tariffs were expected, they have caused a significant sell-off in the stock markets. Australian shares took a hit, with the S&P/ASX 200 index dropping 1.8% by midday. Analysts are concerned about the ripple effects, as China, Mexico, and Canada have all retaliated in some form.
As market analyst Henry Jennings commented, “It could be an overreaction, given that China only got hit with a 10 per cent tariff, but given the record highs, it was due for a pullback and now it has an excuse. Expect more volatility as the tariffs unfold.”
Foreign Market Performance and Implications for Australia
Looking at foreign indices, the Dow Jones dropped 337.47 points, and the Nasdaq fell 54.31 points, indicating global market unease. China’s factory activity also showed signs of slowing, contributing to overall market weakness.
For Australia, the tariff situation is concerning, especially as the Australian dollar has hit a new four-year low, falling below US61.00¢. The negative sentiment has affected businesses across the board, with companies that rely on exports to China or the US particularly vulnerable.
Certainly! Here’s the expanded section with the additional foreign exchange information included:
The Australian Dollar’s Decline
The Australian dollar’s depreciation poses challenges for travellers and importers. In this “risk-off” environment, the dollar is expected to continue falling. “The Aussie dollar is suffering renewed collateral damage from Trump’s trade war,” said Sean Callow, Senior FX Strategist at InTouch Capital Markets.
The weaker dollar is a double-edged sword. While exporters benefit from a cheaper currency, which makes Australian goods more competitive in international markets, it’s a blow for businesses relying on imports and for Australians travelling overseas.
As of 1:55 pm (AEDT) on 3rd February, the Australian dollar (AUD) is under significant pressure against several major currencies. Here are the latest exchange rates:
- US Dollar (USD): 1 AUD buys 0.6096 USD, down 1.85%
- Euro (EUR): 1 AUD buys 0.5962 EUR, down 0.53%
- British Pound (GBP): 1 AUD buys 0.4972 GBP, down 0.78%
- New Zealand Dollar (NZD): 1 AUD buys 1.1030 NZD, up 0.12%
- Canadian Dollar (CAD): 1 AUD buys 0.9011 CAD, down 0.15%
- Swiss Franc (CHF): 1 AUD buys 0.5587 CHF, down 1.27%
- Thai Baht (THB): 1 AUD buys 20.8110 THB, down 0.87%
- Japanese Yen (JPY): 1 AUD buys 94.8100 JPY, down 1.64%
- Indonesian Rupiah (IDR): 1 AUD buys 10,039.50 IDR, down 1.16%
- Chinese Yuan (CNY): 1 AUD buys 4.3863 CNY, down 1.72%
- Singapore Dollar (SGD): 1 AUD buys 0.8338 SGD, down 1.06%
These movements highlight the ongoing weakness of the Australian dollar against a basket of global currencies. The depreciation can lead to higher import costs for Australian businesses, particularly those reliant on raw materials or goods from overseas. It also means Australians will face higher costs when travelling internationally, as their spending power diminishes in foreign markets.
On the other hand, the lower value of the dollar benefits Australian exporters, as their products become more affordable to foreign buyers. However, this advantage may not be enough to offset the broader economic uncertainty sparked by global trade tensions.
Will the Tariffs Directly Impact Australia?
Though Australia’s trade relations with the US are relatively stable due to the Australia-United States Free Trade Agreement (AUSFTA), the global impact of tariffs could still be felt here. Australia does not directly face tariffs from the US, but industries heavily reliant on Chinese imports or exports may face indirect consequences.
EY’s Cherelle Murphy warned, “While we in Australia are not directly affected by these particular tariffs, indirectly it’s quite possible that we can be.” The complexity of global trade means that any disruption to one major economy could have a domino effect on others.
Looking Ahead: The Road to Recovery?
Despite the challenging outlook, some analysts believe the market will recover. AMP’s Shane Oliver forecasts that global and Australian shares will return a more constrained 7% in 2025. The second half of the year could bring stronger growth, and as central banks, including the RBA, continue to cut interest rates, some analysts see opportunities for long-term investors.
However, Betashares’ David Bassense cautioned that the risk of a share market correction has escalated. “Global equities are facing an onslaught of challenges at present…The near-term outlook is messy to say the least and the risk of deeper correction in equity markets has escalated.”
Visited 116 times, 116 visit(s) today
Source link
