Weekly Wrap: Trump’s Tariff Threat: Aussie Pharma Stocks Take a Hit
Trump Rains on Aussie Market but Miners and Banks hit back
President Trump tried his hardest to derail the Australian share market but in the end, it was not quite enough to prevent the market from rising on Friday.
Healthcare stocks were firmly in the crosshairs for investors after President Trump announced a 100% tariff on imports of branded or patented pharmaceutical products from October 1, unless the maker is building a manufacturing plant in the US.
That leaves a lot of leeway for interpretation, but investors sold first and will ask questions later, with shares in blood therapy giant CSL (ASX: CSL) down 1.9%; shares in cancer diagnostic group Telix Pharmaceuticals (ASX: TLX) lost nearly 3%; and imaging group Pro Medicus (ASX: PME) fell by 2.2%.
Big Aussie Pharma has Options
CSL, for one, has considerable operations within the US, so it may be able to sidestep the worst of the trading barrier, but there is no way to know for sure until the chips actually fall, and there is more clarity on exactly how the new tax will hit.
Even companies that confirmed they were exempt from the new tariffs such as dual-listed biopharmaceutical company Mesoblast (ASX: MSB) radiopharmaceutical company Clarity Pharmaceuticals (ASX: CU6) fell by 2.8% and 0.5% respectively.
Banks and miners gallop to the rescue
Fortunately for the Australian market the uncertainty around pharmaceutical companies was eventually offset by a boost in miners and banks.
So, after spending most of the morning lower, the ASX 200 ended up marginally higher for the day, up 0.1% or 11.5 points, to 8784.5 points, as four out of the 11 sectors finally turned positive.
Buoyancy for the miners was shown by a 1.1% rally in the price of Rio Tinto (ASX: RIO) and a 1.3% rise for BHP (ASX: BHP) and despite falls in the price of gold and copper, silver went for a tear after the more affordable precious metal hit a 14 year high.
That was reflected in a 5.7% rise for shares in Silver Mines (ASX: SVL) while Andean Silver (ASX: ASL) jumped 6.2% and Unico Silver (ASX: USL) were up 17%.
Lithium miners were also firmer despite the softer conditions for gold miners, with Evergreen Lithium (ASX: EG1) leaping 31% higher and Liontown (ASX: LTR) up 3%.
The banking sector also had a strong day, up 0.5% led by a 1.1% rise for National Australia Bank shares (ASX: NAB), a 0.8% rise for Commonwealth Bank (ASX: CBA), a 1% rise for Westpac (ASX: WBC) and a 0.9% rise for ANZ (ASX: ANZ).
As usual there were some share price movements in response to new contracts, with shares in renewable energy producer Vulcan Energy (ASX: VUL) adding a strong 15% after it signed a $179 million contract with a consortium of Turboden and ROM Technik to develop and build a geothermal power plant near Landau, Germany.
Shares in dual-listed critical minerals producer IperionX (ASX: IPX) rose 5.4% after it was awarded an extra US$25 million ($38.2 million) project from the US Department of War to strengthen US defence.
The Week Ahead
While most pundits are tipping no change in interest rates when the Reserve Bank board meets this week, there will nonetheless be a sharp watch kept on any hints about how the RBA is interpreting Australian data.
The shocking high inflation reading for August over the past week has led to a lot of speculation that the three gradual interest rate cuts in February, May, and August could be the end of cuts for now.
Other pundits are still pencilling in a 25-basis point cut in November so any illumination of which scenario the RBA was leading towards would be welcome indeed – although the RBA is more likely to keep everyone guessing about its slow and steady approach.
Another indicator this week will be household spending, which has been trending higher in Australia this year.
The other big global news will be the US employment numbers which are expected to see another 30,000 non-farm jobs added and a tick up in the unemployment rate.