A man looks at the market trading boards on show at the Australian Securities Exchange (ASX) in Sydney. Picture: AAP
A man looks at the market trading boards on show at the Australian Securities Exchange (ASX) in Sydney. Picture: AAP

Trump’s China threat sends Aussie dollar down

THE Australian dollar backtracked today on reports the White House was considering new curbs on Chinese investment in the United States, another potential escalation in global trade tensions.

The Aussie dollar dipped to $0.7425 by 12.10pm AEST, having been as high as $0.7443 at one stage.

That was still up on last week's one-year trough of $0.7345, hit after US president Donald Trump announced new tariffs on imports from China and Europe. The latest report from the Wall Street Journal said Mr Trump planned to bar many Chinese firms from investing in US technology and block more technology exports to the Asian giant.

The news knocked US stock futures down 0.5 per cent and chilled risk appetites generally.

"Trump will not be satisfied with the US trade position anytime soon - indeed most likely not at all during his presidency," Westpac senior currency strategist Sean Callow said.

"Moreover, his aggressive trade policy is consistent with his election campaign and there is no sign that it is costing him any support in his political base." The report overshadowed news China's central bank would cut the amount of cash that some banks must hold as reserves by 50 basis points, releasing $108 billion in liquidity into the system.

China is Australia's biggest export customer so anything that might support demand there is considered positive for trade flows and the Aussie dollar.

A man looks at the market trading boards on show at the Australian Securities Exchange (ASX) in Sydney. Picture: AAP
A man looks at the market trading boards on show at the Australian Securities Exchange (ASX) in Sydney. Picture: AAP

The Australian share market is broadly flat in early trade as strong gains across energy and resource stocks are offset by the heavyweight financial and healthcare sectors.

The benchmark S&P/ASX200 was up 1.4 points, or 0.02 per cent, at 6,226.6 points at 1030 AEST after losing most of its initial gains, while the broader All Ordinaries index was up 2.4 points, or 0.04 per cent, at 6,324.5 points. Australian Stock Report head of research Chris Conway says energy companies, including Woodside Petroleum, Origin Energy, Oil Search and Santos are benefiting from OPEC's decision to ease production cuts only modestly. OPEC's move saw oil prices jump up between four to five per cent, Mr Conway said.

"Energy players are really leading the charge today. That sector is clearly the strongest sector that we have," Mr Conway said.

Initially, the local market was supported by the strong momentum out of the US on Friday, with the Dow Jones Industrial Average snapping an eight-session losing streak to finish 0.49 per cent higher, he said.

However, falls across the heavyweight financials and healthcare sectors have since stymied the early morning gains.

Treasurer Scott Morrison at Parliament House in Canberra. Picture Kym Smith
Treasurer Scott Morrison at Parliament House in Canberra. Picture Kym Smith

Resource heavyweights, Rio Tinto and BHP Billiton, were up between 0.7 and 1.51 per cent, thanks to the price of iron ore gaining about 0.7 per cent. Commwealth Bank fell 1.06 per cent to $73.08 after the nation's biggest bank announced plans to demerge its wealth management and mortgage broking businesses, as well as an executive shake-up.

The other big banks, National Australia Bank, ANZ and Westpac, were also in the red.

Metcash shares rallied 15.5 cents, or 5.6 per cent, to $2.945 after the IGA and Foodland supermarkets supplier announced a $125 million share buy back and a full-year net loss of $149.5 million, which had been previously flagged. Meanwhile, the Australian dollar has risen against its US counterpart on the back of OPEC's production decision.

The local currency was trading at 74.29 US cents at 10.30am AEST on Monday, from 74.04 US cents on Friday.

ON THE ASX AT 10.30AM AEST:

* The benchmark S&P/ASX200 was up 1.4 points, or 0.02 per cent, at 6,226.6 points

* The broader All Ordinaries index was up 2.4 points, or 0.04 per cent, at 6,324.5 points

* The SPI200 futures contract was up 2 points, or 0.03 per cent, at 6,169 points

* National turnover was 528.2 million securities traded worth $552.7 million