China may be about to cause a sizeable decline on the ASX today.
The entire world had been hoping that the two large economic superpowers could find a way to solve their differences in the trade talks but it seems it wasn’t to be.
Why China May Be About To Send The ASX Down
You may remember that about a week ago, the US President Donald Trump threatened to grow the tension in the trade war by increasing tariffs on Chinese goods.
The US hike involved increasing the tariff rate on some products up to 25%. President Trump has been boasting that China is paying for the trade, but adviser Larry Kudlow admitted that China wasn’t directly paying – instead it’s the American importers that pay it and often leads to higher prices for consumers.
Overall, the US tariffs were on around US$200 billion of Chinese imported goods.
Today, China said it will put tariffs on US$60 billion of US goods on 1 June 2019 in another tit-for-tat response. Reportedly, over 5,000 US items will now have tariffs from 5% to 25%.
Some of the US products that Chinese consumers will have to pay for include beef, pork, lamb, vegetables, coffee, tea, cooking oil and fruit juice.
As you can guess, the S&P 500 Index (INX) dropped 2.4% overnight and this negativity is going to likely flow on to the ASX and other Asian share markets.
Some ASX shares are likely to be hit harder than others due to their Chinese exposure such as Treasury Wine Estates Ltd (ASX: TWE), Blackmores Limited (ASX: BKL), A2 Milk Company Ltd (ASX: A2M) and Bellamy’s Australia Ltd (ASX: BAL).
One bright spot that might show up is the gold sector on the ASX. The price of gold has gone up and gold miner business share prices also usually go up on days like today. Some candidates could be St Barbara Ltd (ASX: SBM), Northern Star Resources Ltd (ASX: NST) or Saracen Mineral Holdings Limited (ASX: SAR).
Whatever happens today or in the coming weeks, I wouldn’t buy gold shares or sell other shares now based on what’s happening. A) That share price has already moved and B) It would be better to buy shares of your favourites at a cheaper price.
I would rather think about investing in one of the quality, reliable ASX shares in the free report below on a day like today.
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