Market Jitters Shake ASX200 as Trade Tensions and Rate Cut Expectations Weigh on Sentiment

May 06, 2025 10:33 AM AEST | By Team Kalkine Media

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Market Jitters Shake ASX200 as Trade Tensions and Rate Cut Expectations Weigh on Sentiment — Image source: shutterstock

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Highlights

ASX200 dips amid revived US-China trade tensions.

Energy and financial sectors lead market losses.

Small caps showcase exploration progress at RIU Sydney event.

The ASX200 opened Tuesday on a softer note, with futures slipping 21 points (-0.25%) amid renewed geopolitical strains and subdued global market momentum. The previous session saw the index drop 80 points (-0.97%) to 8,157, breaking a seven-day winning streak as trade tensions and soft economic signals unsettled investors.

US-China relations flared again after President Donald Trump signalled potential new tariffs, including a 100% duty on foreign films, and ruled out immediate talks with President Xi Jinping. This abrupt shift in tone dampened last week’s optimism and weighed heavily on both US and Australian equity markets.

Financial stocks bore the brunt of the pullback, with Westpac (ASX:WBC) falling 2.99% to A$32.45 after posting a weaker-than-expected net profit of A$3.3 billion and announcing a lower dividend. The news dragged peers like NAB (ASX:NAB) down 1.75%, Commonwealth Bank (ASX:CBA) down 1.61%, and ANZ (ASX:ANZ) lower by 1%.

Energy stocks also declined sharply as OPEC+ confirmed an upcoming supply increase of 411,000 barrels per day. This triggered sell pressure in local energy names such as Santos (ASX:STO), which slid 3.95%, Beach Energy (ASX:BPT) fell 3.75%, and Woodside (ASX:WDS) dropped 3.59%.

Meanwhile, the Australian bond market is now fully pricing in a 25 basis point rate cut by the Reserve Bank of Australia for May, with a total of 108 basis points in reductions expected by the end of the year. This dovish outlook is expected to influence the appeal of ASX dividend stocks as investors seek more stable income-generating assets.

In the US, Wall Street paused its nine-day rally as concerns over tariffs and inflation reemerged. Ford (NYSE:F) fell 1.07% after warning that trade duties could impact future earnings, while Tesla (NASDAQ:TSLA) declined 2.42%, struggling to break technical resistance. Berkshire Hathaway (NYSE:BRK.A) also slipped 5% following the announcement that Warren Buffett will retire in 2026.

Closer to home, the S&P/ASX Small Ordinaries Index dipped 0.87% but remains 2.23% higher over the past five days. A spotlight is on the RIU Sydney Resources Round-up, where explorers are presenting key updates. Altech Batteries (ASX:ATC) announced a technical breakthrough in its Silumina Anodes™ Project, boasting a 30% improvement in energy density.

Other active small caps include Asian Battery Metals (ASX:ABM), advancing its Mongolian Cu-Ni-PGE exploration, Dynamic Metals (ASX:DYM) reporting assay results from its gold-focused Widgiemooltha Project, and Novo Resources (ASX:NVO), progressing drilling plans at its John Bull Gold Project.

Amid this shifting landscape, investors are closely watching the ASX200 and global signals as trade and central bank decisions continue to drive market direction.

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