The Australian share market has recorded its biggest one-day fall in almost five years after fears of a full-blown trade war and global recession spooked investors, wiping $100bn of value from local stocks.
The benchmark S&P/ASX 200 sank more than 4% to close at 7,343 points, sending it back to levels not seen since December 2023. It represents the steepest drop since the pandemic roiled financial markets.
The huge price falls diminished the value of almost all investment and superannuation portfolios, building on the market falls recorded last week immediately after Donald Trump announced the details of his “liberation day” tariff plan.
“It’s a bloodbath on the share market today in Australia,” said Luke McMillan, the head of research at Sydney-based Ophir Asset Management.
He said the market action resembled falls recorded during the Covid pandemic and global financial crisis.
“The key difference from those other periods is that this one is started by one person, essentially – being the US president,” McMillan said. “We just haven’t really had one person cause a bear market, let alone the president.”
Monday’s tariff-induced falls are so steep that the trading session will join a rare list of days when the ASX dropped by more than 4%, joining the pandemic, 2008 global financial crisis and 1987 stock market crash.
There were few places to hide on the ASX, with everything from banking to mining and energy stocks down sharply.
Australia’s benchmark index is down more than 14% from its February highs.
Investors spooked
While Trump’s new tariff regime sparked an initial sell-off across global share markets last week, plans to hit the US with retaliatory imposts from major economies, including China and the EU, have heightened risks of a global recession.
The ASX trimmed some of its losses after it initially dropped more than 6%, but the modest intraday bounce failed to impress fund managers.
Omkar Joshi, the chief investment officer at Sydney-based Opal Capital Management, said the escalation in trade tensions was weighing on markets.
“If we have a situation where no one backs down and we see more retaliation from both sides, it gets trickier and there’s every possibility that we do continue to go lower from here,” Joshi said.
“My personal view is I don’t think the Trump administration is going to back down quickly or in any meaningful manner.
“You can almost argue it’s the market’s fault for not believing Trump, because he’s actually been pretty transparent about what he wants to do, and the markets haven’t been listening.”
US futures markets are also pre-empting a tough trading session for the American market when it opens for the week.
Traders view Australia’s economy as being closely tied to China through their significant trading relationship.
Tony Sycamore, market analyst at IG Australia, said China’s 34% retaliatory tariffs on all US imports, due to come into effect this week, had sparked fears of a “full-blown trade war, imminent recession and a liquidity crunch last seen during the early pandemic”.
He said while “the door for negotiation” remained open for countries to strike deals with Trump, there was a risk that relief didn’t arrive quickly enough to prevent the global economy from falling into recession.
A handful of listed resources companies involved in critical minerals, such as Lynas Rare Earths, were among the few stocks to record gains on the ASX on Monday after investors bet that China’s export controls over the minerals, used in advanced technologies, would boost demand.
Currency woes
The Australian dollar fell to its lowest level against the US dollar since Covid, as global markets sold off, in price movements that will hurt consumers and travellers.
The local currency has close links to commodity prices, particularly iron ore, which would suffer if global economic activity slowed, especially in China.
One Australian dollar was buying just over 60 US cents late on Monday after falling to a low of 59.64, its lowest point since April 2020. It was worth 64 US cents mid-last week, hours before Trump set markets reeling with his tariff announcement.
The Australian dollar also reached pandemic-era lows in Europe, with one dollar buying just 54.4 Euro cents or 46.2 British pence at its lowest point on Monday morning.
Markets were selling off the Australian dollar in Asia, too. It was worth less than 15,500 Vietnamese dong on Monday when it had been buying almost 16,500 dong on Wednesday. The dollar slumped in India, Indonesia and New Zealand.
“When there is concern about a global slowdown, and particularly from the tariff and global trade war, then there is less demand for our commodity,” AMP economist My Bui said, referring to iron ore.
