Australian stocks are expected to plunge to depths not visited in five months amid trading jitters around trade tit-for-tat between the United States and China.
The benchmark S&P/ASX200 index fell 1.96 per cent on Friday to 5,820.7 points, shedding $40 billion in value with major mining and metals stocks suffering the worst impact.
With the US and Canadian markets closing down more than one per cent on Friday, CommSec chief economist Craig James predicts similar falls for local stocks when the market opens on Monday.
A fall of one per cent or 58 points would drop the benchmark index well below 5786 – a mark last crossed on October 12, 2017.
“If we’re going to get any support, it’s going to come from the energy and the gold sector,” Mr James said on Sunday.
“Gold was up quite substantially on Friday and we also had some really good gains with the oil price.
“Those gains are going to help our market but the iron ore price moved the other way so that’s going to weigh the major iron ore producers. Base metals were also down.”
US President Donald Trump last week moved to impose tariffs on up to $US60 billion worth of Chinese imports and China retaliated with plans for tariffs on up to $US3 billion of imports from US.
As well as influencing falls across Asia, Australia was a surprise announcement from the White House that exemptions granted to heavy steel and aluminium import tariffs would only be temporary, pending new negotiations, and that quotas may be imposed on imports of the metals.
“There’s an expectation that tariffs will be imposed by the United States on China but it hasn’t happened yet,” Mr James said.
“It’s a negotiating ploy by the US.
“If you can get some degree of reconciliation between the two parties, we will see the markets bounce from the lows.”
Elsewhere, it’s expected to be a quiet four-day week ahead of the Easter break.
ANZ-Roy Morgan Consumer Confidence weekly survey is expected to come out on Tuesday, while reports on private sector credit and jobs by industry should be available later in the week.
The Australian Competition and Consumer Commission on Thursday is expected to rule on Saputo’s takeover of one of Australia’s largest milk producers, Murray Goulburn.
A pair of independent reports earlier in March backed the Canadian giant’s $1.3 billion offer for the troubled dairy processor, which boasts Devondale among its consumer brands.
Murray Goulburn has estimated that the net equity value of the Saputo offer is about $653 million.