The Australian share market is tipped to open lower after the resumption of the US-China trade war pushed Wall Street sharply lower.

August 4, 2019

The Australian share market is tipped to start the week lower after concerns over the US-China trade war triggered sharp falls on Wall Street.

Investors have been rattled by Donald Trump’s recent decision to slap a 10 per cent tariff on $300 billion worth of goods, effectively taxing all Chinese exports to the United States.

At the close on Friday, the S&P 500 was down 21.51 points or 0.7 and the Dow had fallen nearly 100 points or 0.4 per cent.

AMP Capital’s chief economist Shane Oliver says the worry has set the ASX up for a weak kickoff on Monday, which he expects to open down 20 points or 0.3 per cent.

“The reason our Futures market hasn’t come down as much is because our market has more defensive stocks in there … like telcos, utilities, real estate investment trusts,” he told AAP on Sunday.

“Investors tend to like them whenever share markets are falling so we tend not to go down as much as Wall Street.”

However, Dr Oliver said the escalating trade could dent demand for Australian exports if US, China and global economic growth is affected.

“That’s the main threat to Australia and why our share market came down on Friday, and why the Aussie dollar came down,” he said.

The falling iron ore price after the massive Brazilian miner Vale re-entered the market is also likely to weigh on the Australian share market, Dr Oliver said.

In the week ahead, all eyes will be on interest rates after the Reserve Bank of Australia board meeting on Tuesday.

“I think they’ll leave interest rates unchanged (at 1 per cent) but probably indicate they’re prepared to do more if needed,” Dr Oliver said.

It will be followed by RBA Governor Philip Lowe’s six-monthly question and answer session with the economic parliamentary committee.

Dr Oliver said Mr Lowe will probably indicate he’s still confident in the outlook for the economy but given unemployment is higher than the RBA would like, the bank is likely to leave the door open for more interest rate cuts.

On Tuesday, Australia’s June trade figures are expected to show continued good news, however, these will be followed on Wednesday by June’s housing finance figures, which Dr Oliver says are likely to be soft.