ASX Weekly Review | Trump's Tariff Threats: Australian Pharmaceutical Stocks Take a Hit

Trump suppresses the Aussie Market, but Miners and Banks Fight Back

President Trump made every effort to disrupt the Australian stock market, but ultimately failed to prevent the stock market from rising on Friday.

After President Trump announced that from October 1st, a 100% tariff would be imposed on the import of all brand or patented drugs (unless the manufacturers established production facilities in the United States), healthcare-related stocks immediately became the focus of investors' attention.

This left a lot of room for interpretation, but investors first sold their stocks before raising questions. The share price of CSL, a blood therapy giant (ASX: CSL), dropped by 1.9%; the share price of Telix Pharmaceuticals, a cancer diagnosis group (ASX: TLX), dropped by nearly 3%; and the share price of Pro Medicus, an imaging group (ASX: PME), dropped 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

Although most experts expect that the central bank's board meeting this week will not result in any change to the interest rate, people will still closely monitor any hints from the central bank regarding how to interpret the economic data of Australia.

The inflation data for August, which was released in the past week, was shockingly high. This has sparked many speculations that the three gradual interest rate cuts in February, May, and August might be the final stage of the rate cuts.

Other experts still expect a 25 basis point rate cut in November. Therefore, if it can reveal which scenario the Reserve Bank of Australia prefers, it would be highly anticipated - although the Reserve Bank of Australia is more likely to keep everyone guessing about its slow but steady strategy.

Another important indicator this week will be the situation of household consumption. Over the past year, household consumption in Australia has been on the rise.

Another major global news item will be the employment data of the United States. It is expected that the country will add 30,000 non-agricultural jobs, while the unemployment rate will also rise slightly.