Australian Stock Market Plummets Amid Escalating Trade War Fears
The Australian sharemarket faced a dramatic selloff on Monday, with the benchmark S&P/ASX 200 plunging over 6% at the open—its steepest intraday drop since late 2023—before paring losses to 4% by midday. The turmoil erased an estimated $160 billion from the market initially, later easing to $100 billion as stocks staged a partial recovery.
Market Turmoil and Global Recession Risks
The sharp decline mirrored global anxieties over escalating trade tensions sparked by former U.S. President Donald Trump’s proposed “liberation day” tariffs, announced last week. Retaliatory measures from China, the EU, and other major economies have amplified fears of a full-blown trade war and a potential global recession.
“It’s a bloodbath on the share market today in Australia,” said Luke McMillan, Head of Research at Ophir Asset Management, likening the selloff to drops seen during the COVID-19 pandemic and 2008 financial crisis. “The key difference is this downturn is triggered by one person—the U.S. president. We’ve never seen a single individual spark a bear market like this.”
No sector was spared, with heavy losses in banking, mining, and energy stocks. Shares in market giants Commonwealth Bank and BHP tumbled over 5% during the session.
Currency and Commodity Pressures
The Australian dollar plunged to its lowest level since April 2020, sinking to 59.64 U.S. cents before recovering slightly to 60 cents by midday. The currency also hit multi-year lows against the euro (54.4 cents) and British pound (46.2 pence), while weakening sharply across Asian markets, including Vietnam, India, and Indonesia.
AMP economist My Bui noted the dollar’s vulnerability to trade war risks: “With tariffs threatening global growth, demand for Australia’s key exports like iron ore—closely tied to China’s economy—is at risk.”
Hope for a Truce?
Despite the midday rebound, analysts cautioned that sustained recovery hinges on de-escalation. “Markets need a catalyst to stabilize—they don’t just rebound on their own,” McMillan emphasized. Tony Sycamore, Market Analyst at IG Australia, warned that China’s impending 34% tariffs on U.S. imports could accelerate a “liquidity crunch reminiscent of early COVID,” though he noted room for negotiation remains.
The ASX’s partial recovery tracked Wall Street futures, which also pared losses after a brutal session. Investors now await signs of diplomatic progress to avert further economic damage, as fears of recession loom larger.
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