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Will the ASX’s blue chips be hit by Australia’s economic worries?

Is it possible that the ASX’s blue chips like BHP Group Ltd (ASX: BHP) will be affected by Australia’s economic worries? It’s definitely possible. 

There are two things that are on Australian minds at the moment. Bushfires and the coronavirus.

Treasurer Josh Frydenberg has already warned that the impact from the China shutdown and the bushfires would be significant. There are worries that the Australian economy could contract in this quarter. Two quarters of contraction would count as a recession.

Australia is obviously heavily linked to China in many ways. It’s our biggest economic partner. Think of all the miners like BHP, Rio Tinto Limited (ASX: RIO) and Fortescue Metals Group Limited (ASX: FMG) which materials sell to China.

Think of all of the Chinese tourists and students that come to Australia. Think of the ASX consumer businesses that sell heavily into China like Blackmores Limited (ASX: BKL) and A2 Milk Company Ltd (ASX: A2M).  

No-one is saying that China is going to be affected for the long-term. But each week that affects China is a week of lower demand. Full year financial results are made up 52 individual weeks.

Even the domestic businesses are facing a bit of a sell-off today. The Commonwealth Bank of Australia (ASX: CBA) share price is down 1.25%, the Westpac Bank Corp (ASX: WBC) share price is down 2.2%, the Wesfarmers Ltd (ASX: WES) share price is down 0.7% and the Telstra Corporation Ltd (ASX: TLS) share price is down almost 1%.

Foolish takeaway

Whether the earnings will be materially affected or not, it’s clear that some investors are wanting to get out of shares. Who knows what’s going to happen with the coronavirus? You may be able to find some better value shares today and there could be a lot more volatility in the coming weeks.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Blackmores Limited and Telstra Limited. The Motley Fool Australia owns shares of A2 Milk and Wesfarmers Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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