Australia, New Zealand: Shares slip on worries of long US-China trade war

[BENGALURU] Australian shares slipped on Friday, dragged down by financials and energy stocks as more investors price in the possibility of a protracted Sino-US trade war.

Despite Friday's losses, the S&P/ASX 200 index was on track for a weekly gain of about 1.3 per cent, its best performance in four weeks. The weekly gain is rooted largely from optimism after results in Australia's general election on May 18.

At 0051 GMT, the index was down 46.20 points or 0.7 per cent to 6,445.40.

Worries over Sino-US trade tensions contributed to drops of more than 1 per cent overnight for main US indexes.

US President Donald Trump said on Thursday that Washington's complaints against Huawei Technologies might be resolved within the framework of a US-China trade deal, while at the same time calling the Chinese telecommunications giant "very dangerous."

Greg McKenna, founder of Sydney-based financial advisory firm McKenna Macro, said in a note "We have had a narrative shift as traders and investors have woken to the notion that the trade war is becoming intractable and hegemonic."

The trade war is becoming like Brexit as the protagonists retreat to their corners and are ready for a fight, he added.

Australian financials weighed most heavily on the benchmark. Commonwealth Bank of Australia slipped 1.1 per cent while National Australia Bank lost 1.2 per cent.

Still, financial stocks had a weekly gain so far of about 5.5 per cent - which would make for their best week since Feb 4-8, thanks to a near 8 per cent advance on Monday and Tuesday combined.

Energy stocks plunged nearly 3 per cent, after oil prices gave up about 5 per cent as trade tensions hit the demand outlook. The sub-index was set for a weekly loss of about 4.1 per cent, its worst performance since late March.

Woodside Petroleum dropped 3.3 per cent while Santos lost 4 per cent.

Miners also edged down and was headed for a weekly loss of over 2 per cent, despite record high iron ore prices.

Bucking Friday's trend, the defensive healthcare stocks which tend to perform well during times of market volatility, were slightly higher.

Index heavyweight CSL added as much as 0.7 per cent, while Cochlear rose 0.6 per cent.

Also benefiting from increasing tensions were gold stocks which surged 1.5 per cent. Newcrest Mining rose 1.3 per cent.

New Zealand's benchmark S&P/NZX 50 index fell 0.4 per cent or 39.34 points to 10,224.07, but was on track for a weekly gain of about 0.3 per cent.

Diary giant a2 Milk Company fell 1.6 per cent while Synlait Milk shed 3.4 per cent, among top losers on the kiwi index.

REUTERS