Wednesday, December 16, 2020

Intensifying China trade war dents Australian resource stocks, ASX lower

The Australian sharemarket was dragged lower by resources stocks on the back of alarming news China has apparently stepped up its trade war and is now targeting mining exports.

The S&P/ASX200 closed 0.43 per cent lower at 6631.3 while the All Ordinaries Index fell 0.49 per cent to 6866.7.

Chinese state-owned media has reported a new policy allows power plants to import coal without customs restrictions from every country but Australia.

Trade Minister Simon Birmingham on Tuesday urged the Asian superpower to “immediately rule out these reports of what, if accurate, would appear to be the use of discriminatory practices against Australian coal”.

CommSec analyst James Tao said there was plenty of talk that China had “formally banned” Australian coal, which dragged the share prices of local producers lower.

Whitehaven Coal slumped 5.88 per cent to $1.52, New Hope Corporation gave up 2.73 per cent to $1.42 and Coronado Global Resources plunged 10.04 per cent to $1.03.

Iron ore miners also dragged the market lower after the price of the steelmaking commodity tumbled almost 4 per cent overnight, but remained relatively elevated about $US154 per tonne, Mr Tao said.

It comes after the China Iron and Steel Association said the iron ore pricing system had “failed” and called on regulators to intervene if necessary.

Rio Tinto retreated 1.33 per cent to $112.42, BHP dropped 2.25 per cent to $41.78, Fortescue Metals Group shed 3.07 per cent to $21.48 and Mineral Resources declined 6.77 per cent to $32.36.

Gold miner Westgold Resources went into a trading halt pending an announcement after its shares had already lost 5.58 per cent to $2.63.

Mesoblast plummeted 15.2 per cent to $3.85 after disappointing results from the trial of its rexlemestrocel-L therapy in 537 patients with advanced chronic heart failure.

The Australian Competition and Consumer Commission has launched legal action against Retail Food Group, the company that owns Gloria Jeans, Donut King and Brumby’s Bakeries, for allegedly deliberately selling or licensing 42 loss-making stores to new franchisees, with more than one-third now closed.

RFG shares backtracked 6.59 per cent to 8.5 cents.

The ACCC also expressed concern over Woolworths’ planned deal with 77-year-old family-owned wholesale food distributor PFD Food Services, including it likely increasing the supermarket giant’s already substantial bargaining power in dealings with manufacturers.

Woolworths shares inched 0.26 per cent lower to $39.07 while rival Coles added 0.55 per cent to $18.28.

Mr Tao said Bunnings owner Wesfarmers hit record highs, climbing to $51.64 in morning trade before closing 0.06 per cent firmer at $50.97.

Buy-now-pay-later provider Zip Co rose almost 1 per cent to $5.22 after announcing it had entered into a partnership with retailer Harvey Norman.

The big four banks were all lower. ANZ eased 0.9 per cent to $22.97, Commonwealth Bank gave up 1.01 per cent to $83.07, National Australia Bank backtracked 0.72 per cent to $23.38 and Westpac slid 0.5 per cent to $19.93.

The Aussie dollar was buying 75.21 US cents, 56.36 British pence and 61.87 Euro cents in afternoon trade.

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