Australia

The Australian share market is set to open flat as investors watch with caution the escalating trade tensions between the US and China.

At 8.30am (AEST) ASX futures were flat at 6100. The Australian dollar has fallen 0.5 per cent to 74.41

US president Donald Trump unveiled an initial list of strategically important goods that would be subject to a 25 per cent tariff effective July 6, a move China's Commerce Ministry called "a threat to China's economic interest and security".

China issued its own list of US imports subject to tariffs, targeting soybeans, aircraft, autos and chemicals. Since early May, the two countries have held several rounds of talks but have yet to reach a deal, as the US pressures China to narrow a $US375 billion trade deficit.

The Australian share market closed on Friday at a four-week high after gains in energy and mining stocks. The benchmark S&P/ASX200 rose 1.29 per cent to 6094.0 points while the broader All Ordinaries index was up 1.23 per cent at 6205.3 points.

Asia

Asia's key equities index also lost ground, led by China, with Japan the only main bourse to buck the trend.

The Asia Pacific MSCI index ex-Japan edged down 0.3 per cent while Nikkei average 225 rose 0.50 per cent to 22,851.75.

China's benchmark Shanghai Composite index plumb a 20-month low, as investors worried about the economic damage from the trade tensions. It fell 0.73 per cent to 3021.90. The CSI300 lost 0.53 to 3753.43.

Hong Kong stocks fell as Washington looked set to unveil a tariff list targeting $US50 billion Chinese goods, and Beijing vowed to retaliate, putting investors on edge.

The Hang Seng index fell 0.43 per cent, to 30,309.49, while the China Enterprises Index lost 0.67 per cent, to 11,870.18 points.

Europe

The escalating US-China trade spat sent UK stocks tumbling on Friday, sinking oil and mining shares in a broad reversal across European markets.

President Trump announced tariffs on $US50 billion worth of Chinese imports and Beijing threatened to respond in kind, stopping the FTSE 100's earlier rally in its tracks and sealing the fourth straight week of losses for Britain's top share index.

The FTSE 100 ended the day down 1.70 per cent, at 7633.91, resulting in a 0.6 per cent loss on the week.

One bright spot, however, was Rolls-Royce, which jumped 7.6 per cent after the engine maker issued ambitious mid-term goals.

Europe's key index were similarly negative with the pan-European basic resources sector down 3.3 per cent in its worst daily fall since November 2016.

The pan-European FTSEurofirst 300 index lost 0.76 per cent, while Germany's DAX lost 0.74 per cent to close at 13,010.55.

North America

The S&P 500 has edged up and the Nasdaq has reached another record closing high after the European Central Bank said it would avoid raising interest rates until mid-2019, and data showed US economic strength.

The strong US retail sales numbers came a day after the Fed's rate rise.

The ECB announced it would end its bond-purchase program at year-end but signalled that any interest rate hike was still distant.

The Dow Jones Industrial Average fell 25.89 points, or 0.10 per cent, to 25,175.31, the S&P 500 gained 6.86 points, or 0.25 per cent, to 2782.49 and the Nasdaq Composite added 65.34 points, or 0.85 per cent, to 7761.04.

 

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Morningstar with AAP

Lex Hall is a Morningstar content editor, based in Sydney.

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