Australia Stocks mixed on profit booking, US-China trade tensions

Headline equities of the Australian market were mixed on Wednesday, 22 May 2019, as investors elected to book profit amid lingering trade tension between the U.S. and China. Around late afternoon, the benchmark S&P/ASX200 index edged up 0.66 point, or 0.01%, at 6,500.80 points, while the broader All Ordinaries was up 4.61 points, or 0.07%, at 6,589.

Local market lacks a clear directional bias this Wednesday morning, despite the overnight gains in the US stocks, possibly due to reports that the Trump administration is considering blacklisting Hikvison - a major Chinese surveillance technology firm. That could only lead to further escalation of trade tensions between the world's two biggest economies.

Investors worried that the lack of progress in talks between the United States and China could signal a protracted trade war and harm the Australian economy. China is Australia's biggest trading partner and the negative impact of the trade war on the Chinese economy could harm demand for Australian products.

President Xi Jinping called for a new Long March in a speech at Jiangxi, where Mao Zedong began his ascent to power during a series of retreats by the Red Army to evade pursuing Nationalist forces, as per reports. Investors took it as a sign that China is preparing for a protracted trade war, with no clear path to a trade deal in the near future.

Shares of banks and financials declined on profit booking after sharp rally over the previous two sessions. Lenders were also hit after Australia's financial regulator said it may impose additional capital requirements on some financial institutions after it found weakness in their ability to self-assess non-financial risk. Commonwealth Bank of Australia and Australia and New Zealand Banking Group each fell 0.9%.

Shares of materials and resources were also lower. Mining giant BHP Group and rival Rio Tinto fell as much as 0.8% and 0.5%, respectively. Fortescue Metals Group fell as much as 9% as its shares traded ex-dividend.

Shares in Lynas Corp were up 9.1%. Lynas went into a trading halt yesterday afternoon so it could re-issue details about mineral resources and ore reserves given during its investor day. It withdrew forecasts saying it has 3 million tonnes of rare earth deposits and 1.7 million tonnes of rare earth ore reserves at Mt Weld, saying these were just "opportunities" based on production to date.

Shares of property and building material manufacturers continued to rise, boosted by Australia's prudential regulator easing lending criteria for home loans. James Hardie rose 2.4%, Adelaide Brighton added 6.1% while property developer Stockland Corporation tacked on 3.3%. Boral gained 1.4%.

CURRENCY NEWS: The Australian dollar declined against the U.S. dollar on Wednesday, after the country's central bank governor said an interest rate cut will be considered in June. The Australian dollar changed hands at $0.6880 after dropping from highs above $0.690 yesterday.

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