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Australia: Shares plunge to 5-week low on trade war worries; NZ down

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[BENGALURU] Australian shares plunged to their lowest in more than five weeks on Friday, following Wall Street's slide after President Donald Trump signed a memorandum that could impose heavy tariffs on imports from China - sparking fears of a global trade war.

The S&P/ASX 200 index fell 1.6 per cent, or 96.6 points, to 5,840.6 by 0024 GMT, its lowest since Feb 14. The benchmark had its biggest intraday percentage loss in six weeks and was on track for a second straight weekly fall.

The presidential memorandum will target up to US$60 billion in Chinese goods.

In Australia, materials and financial stocks led the losses on the main index.

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"We've got two things playing out: the US Federal Reserve has upgraded the rate cycle, especially for 2019, and the market usually takes a few days to absorb that. Secondly, the tariffs have come through, and the US is flagging that purely against China," said Mathan Somasundaram, market portfolio strategist, Blue Ocean Equities.

"The market will be worried because Australia is pretty much a proxy for global trade, so if there's any kind of trade war, we take the negative side of it. Our currency doesn't have much yield premium and if commodities weaken on trade worries, the currency drops dramatically."

The materials sector slid as much as 3.6 per cent, falling the most in nearly a year on a drop in commodity prices, with BHP Billiton and Rio Tinto losing 3.6 per cent and 4.4 per cent, respectively.

Oil retreated as investors took profits after this week's rally, while copper fell to three-month lows amid a broad slump in base metal prices.

Financial stocks fell as much as 1.7 per cent to their lowest in more than six months, with the 'Big Four' banks slipping between 1.4 per cent and 1.8 per cent.

Consumer staples and healthcare stocks also contributed to the heavy losses.

Wesfarmers Ltd shaved off over 1 per cent, while CSL Ltd lost 2 per cent.

"Any hit to the economy means there are worries that consumer spending will be reduced. A further hit to the economy means that it's going to get even weaker. Our main discretionary spending is in retail and healthcare so both of them will be hit quite a bit," said Somasundaram.

Meanwhile, New Zealand's benchmark S&P/NZX 50 index edged down 1.2 percent, or 101.17 points, to 8,499.64.

Consumer staples and healthcare stocks dragged the index down, with a2 Milk Company and Fisher & Paykel Healthcare Corporation shedding 3.6 per cent and 1.3 per cent, respectively.

AFP