ASX tumbles as Trump trade turns toxic

Shares tumbled for a second session on Thursday in a sign investors may finally be shedding their complacency in regards to the potential fallout from the rolling controversies surrounding US president Donald Trump.


The S&P/ASX 200 index shed 48 points, or 0.8 per cent, to 5738 after dipping below 5700 points in morning trade.

The heavy falls in US stocks leading into the open – the S&P 500 index fell 1.8 per cent – were not replicated in full on the local exchange, as investors had already pushed the ASX lower through the Wednesday session in anticipation of that night’s losses.

The Australian dollar strengthened following the release of official jobs data, which showed the unemployment rate dipped to 5.7 per cent in April from 5.9 per cent the prior month. The Aussie climbed US0.3?? to trade at US74.6?? in late Thursday trade.

A lift in Wall St futures through the session helped limit losses on the local bourse. The heavyweight banks were the biggest drag on the ASX, but the losses among the big four lenders were not drastic. Westpac was the biggest single detractor as it traded without the right to its upcoming dividend and fell 3.1 per cent.

With the level of political uncertainty on the rise, “markets are set to enter risk-off mode in the near-term”, Credit Suisse strategist Hasan Tevfik said.

Mr Tevfik tipped that more “defensive” style stocks should outperform in such an environment, and that is how it played out on Thursday.

Reliable earners such as toll road operator Transurban Group and Sydney Airport were among the relatively few names to end the day in the black, adding 0.9 per cent and 1.2 per cent, respectively. Gold miners were also favoured as a result of their famed safehaven status.

Investors are now wondering whether the recent extended period of calm on Wall St has come to a definitive end.

“This all comes on the heels of the sharp dive in the US economic surprise index and last week’s further softness in US inflation,” NAB economist David de Garis said.

“Now politics is intervening to add more noise into a market already wondering whether the US economy is slowing or not.”

Amid the overseas noise, there was no shortage of corporate news on the ASX.

Shares in Fairfax Media jumped 7 per cent to $1.24 on news of a competing bid from private equity firm Hellman & Friedman. The new offer was for as much as $1.25 per share, against a $1.20 offer from a consortium led by TPG. The publisher said it would allow both bidders to now conduct due diligence.

James Hardie shares slumped 7.8 per cent after the buildings group released annual profits and spoke of “reputational damage” as a result of US supply disruptions through the year.

Investors dumped Sirtex Medical shares after research into the company’s liver cancer treatment seemed to confirm that it had a dwindling chance of becoming a potential alternative to chemotherapy. MARKET MOVERSStock of the day

Vita Group shares finally stabilised on Thursday, a week after the mobile phone retailer issued a profit downgrade on the back of an unfavourable renegotiation of its lucrative relationship with Telstra. That news sparked a 30 per cent plunge in Vita’s stock. This week Vita, which operates Telstra-branded stores, was battered again as the big telco said it would reduce remuneration to Vita by around 10 per cent, and by a further 10 per cent at the start of each of the 2019 and 2020 financial years. On Wednesday the stock dropped another 30 per cent. Analysts at Canaccord were the latest to drop their estimates, on Thursday telling clients forecasting the shares would be $1.03 in 12 months’ time, from their previous target of $2.26. They retained their “hold” recommendation, a stance echoed by the two other brokers covering the stock. On Thursday Vita shares were flat at 90??. In September last year they peaked at $5.35. Jobs data

Economists were cheered by news that Australia’s unemployment rate dropped to 5.7 per cent in April, from 5.9 per cent the prior month. The ABS data showed that the economy created 37,400 jobs in April. Economists had been predicting a 5000 increase in roles. A solid headline number did have a bit of a sting in the tail, as the economy lost 11,600 full-time jobs in April. The jump in total employment, then, came down to an extra 49,000 part-time roles. Asian shares

Exchanges around the region tumbled as investors dumped stocks, worried that the US administration would be distracted from its stated pro-growth policy agenda. Japanese stocks were among the hardest hit as a stronger yen added to selling pressure. The Nikkei index was 1.5 per cent lower in late Thursday trade. Falls in Chinese stocks were more contained. The mainland Shanghai measure dropped 0.2 per cent, while Hong Kong’s Hang Seng index fell 0.3 per cent. Impeachment odds

International bettors are ramping up wagers in niche online markets over whether Donald Trump will serve out a full term as US president. Some, such as the online political stock market PredictIt, have seen record volume during the last two days on contracts focused on whether Trump will be impeached. The latest odds suggest a 27 per cent chance Trump would be impeached. Wagering through British betting firm Ladbrokes suggests about a 56 per cent chance the US president will be removed from office. Inflation expectations

Melbourne Institute’s gauge of consumers’ 12-month inflation expectations eased to 4 per cent from 4.1 per cent, data showed Thursday. The figures “support the view that consumer inflation expectations have stabilised”, NAB economist Tapas Strickland said. The weighted mean of responses, which more closely tracks the RBA’s preferred measure of inflation, was also stable at 2.4 per cent and in the middle of the central bank’s 2-3 per cent target band. The figures should give the RBA “a degree of confidence in its forecasts of underlying inflation getting back to the target band by mid-2018,” Mr Strickland said.

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