Australian shares are set for their biggest opening drop in more than six months on Monday after stocks in New York slumped from record highs amid an escalation in the trade war between the United States and China.
Prices are expected to begin 0.9% lower, the sharpest drop since April, based on Australian Securities Exchange (ASX) trading, which marked the S&P/ASX 200 December share price index contract 38 points below the previous settlement at 8,896 points.
Wall Street slumped on Friday (Saturday AEDT) after President Donald Trump escalated the conflict with China in response to Beijing tightening its restrictions on rare earths, denting the confidence of investors unnerved by the U.S. government shutdown.
After the market had closed, Trump wrote in a social media post that he would impose an additional 100% tariff on imports from China and export controls on U.S.-made software.
The Dow Jones Industrial Average dropped 1.9% and the S&P 500 dived 2.7% but the largest losses were found in the Nasdaq Composite, which plunged 3.6% as the post undercut technology shares like Nvidia, Tesla, Amazon and Advanced Micro Devices.
Carson Group Chief Market Strategist Ryan Detrick said Trump's post was a surprise, which produced some of the most volatile trading in a long time.
"The second largest economy and the first largest economy are arguing again, and we're seeing a sell first, ask questions later mentality to end the week," he was quoted in a Reuters story as saying.
"One could argue we were due for some spookiness this October."
A lower start will add to the losses from Friday in Australia, where the S&P/ASX 200 ended down 0.1% at 8,958.3 despite eight of the 11 sectors finishing higher.
In fixed interest markets, yields on Australian Government bonds dropped, with two-year rates shedding 0.92% to 3.459% and 10-year rates losing 0.76% to 4.286%.
