Australia Market extends losses on growth worries, trade tensions

Headline indices of the Australian financial market declined for second straight session on Wednesday, 23 January 2019, as investors continued withdrawing recent profit amid concerns over the state of ongoing U.S.-China trade negotiations, after reports that the White House had canceled a trade planning meeting with Beijing this week. ASX sectors traded mixed, with energy stocks led losses on the back of drop in crude prices but the healthcare sector has climbed into the day. Around late afternoon, the benchmark S&P/ASX200 index declined 13 points, or 0.2%, to 5,845.80 points, while the broader All Ordinaries index dropped 13.28 points, or 0.2%, to 5,911 points.

Investors risk sentiments remain subdued on reports that the U.S. had cancelled a trade meeting with Chinese officials. White House economic advisor Larry Kudlow, however, denied that report, telling that there was never a planned meeting other than the scheduled visit by Chinese Vice Premier Liu He next week. The U.S. and China are aiming to strike a deal to break their trade impasse before March 1. The two economic powerhouses have been locked in an ongoing trade war since 2018 which has seen both sides slap billions of dollars worth of tariffs on each other's goods.

On Monday, the International Monetary Fund (IMF) in its latest World Economic Outlook has downgraded its global growth forecast for 2019 to 3.5% and 3.6% for 2020 - 0.2% and 0.1% respectively below its previous prediction, citing a bigger-than-expected slowdown in China and the Eurozone, and said failure to resolve trade tensions could further destabilise a slowing global economy. Growth in China last year was the slowest since 1990 and investors are hoping for a breakthrough in US-Sino trade talks, with the tariff dispute between the world's largest economies already rippling through financial markets and global growth.

Energy stocks extended losses after a 2% oil price dive, with Oil Search shares falling 1.7% and Origin Energy dropping 2.4%. Santos shed 2.2%, Caltex dropped 1.3%, and Woodside Petroleum was 1.1% lower.

Materials were lower too, with BHP falling 1% after being accused of underpaying up to $300 million in iron ore royalties to the West Australian government dating back to 2004. On Tuesday the mining giant said its second-quarter iron ore production fell 9%. Rio Tinto fell 0.7% while gold miner Northern Star plummeted 6.6% after flagging rising costs for the coming year.

Shares of financial sector were mixed. Commonwealth Bank and Westpac edged slightly higher while ANZ was unchanged and NAB slightly lower after a tough morning for the banking sector. Macquarie Group was down 0.7% while Challenger was 14.8% lower following a poor first half trading update. Pinnacle Investment shares dropped 7.4% despite expectations of a 25% half-year profit lift. IOOF holdings fell 3.8% to $5.51 after repaying super fund members following an accidental sale of assets in 2015.

Healthcare benchmark CSL rose 0.8%, ResMed was up 1% while Cochlear and Ramsay Healthcare were also higher.

CURRENCY: Australian Dollar softened against greenback and against a basket of other peers on Wednesday. The Australian dollar was at $0.7124 after seeing highs above $0.714 yesterday.

OFFSHORE MARKET NEWS: US share market closed down on Tuesday. The Dow Jones Industrial Average fell 301.87 points to close at 24,404.48. The S&P 500 shed 1.4% to finish at 2,632.90 while the Nasdaq Composite slipped 1.9% to close at 7,020.36.

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