Australian shares fell sharply on Thursday after Wall Street suffered its worst daily sell-off in two years.
Most important points:
- Australian dollar trades near two-year low
- Unemployment rate expected to fall to 3.9 pc
- UK inflation rose 9 percent, highest in 40 years
The ASX 200 fell 1.8 percent to 7,057 points at 10:25 AM AEST.
The broader All Ordinaries index fell 1.8 percent to 7,293.
In dollar terms, morning trading wiped about $47 billion of the value of the local stock market.
Each sector traded lower, with technology, consumer discretionary and basic goods being the worst performing sectors.
Shares of the country’s largest companies have fallen, including Westpac (-3.7 pc), Rio Tinto (-2.2 pc), Wesfarmers (-5.4 pc), Graincorp (-4.2 pc), Domain (-4.2 pc) and Woolworths (-3.9). pc).
The Australian dollar recovered slightly to 69.7 cents, but that was after a 1.1 percent overnight collapse.
In economic news, the Bureau of Statistics (ABS) will release the latest figures on the state of the labor market at 11:30 a.m. AEST.
Economists polled by Reuters expect the Australian unemployment rate to fall to 3.9 percent, the lowest level since the 1970s, and to hire 30,000 additional workers.
Inflation here for ‘even longer’
On Wall Street, the Dow Jones index lost 1,165 points, or 3.6 percent, to 31,490, the worst one-day loss since June 2020. It was the lowest close for the Dow since March 2021.
The S&P 500 closed 4 percent lower at 3,924, also the worst decline since June 2020. The benchmark index is down about 17 percent since the start of the year. The Nasdaq Composite fell 4.7 percent to 11,418, the biggest drop in the tech-heavy index since May 5. It too has plummeted by about 27 percent in the past five months.
US retailer Target lost a quarter of its value in one trading day after confirming it was the latest victim of rising inflation. March profits fell by half and the company warned of a wider margin due to rising fuel and freight costs.
Shares fell 25 percent, the worst session since the Black Monday crash on Oct. 19, 1987.
“We think the evolving impact on retail spending, as inflation has outpaced wages for even longer than people might have anticipated, is a major factor in driving the current market sell-off,” said Paul Christopher, head of global sales. market strategy at Wells Fargo Investment Institute.
“Retailers are beginning to reveal the impact of the erosion in consumer purchasing power.”
Interest-rate-sensitive mega-cap growth stocks contributed to recent declines. Tesla, Nvidia, Amazon, Apple and Microsoft all fell sharply.
UK inflation hits 40-year high
European markets also fell sharply, including the British FTSE (-1.1 percent), the German DAX (-1.3 percent) and the French CAC (-1.2 percent).
The gloomy mood was underlined by a 9 percent rise in consumer prices in the UK and a faster-than-expected acceleration in Canada.
According to the Office for National Statistics, UK inflation rose to its highest annual level since 1982 when energy bills rose.
As a result of the Russian invasion of Ukraine, those bills are likely to rise again in October.
Last month, the International Monetary Fund predicted that in 2023 Britain will experience slower economic growth and more persistent inflation than any other major economy.
Meanwhile, Canadian inflation rose to 6.8 percent last month.
It was largely driven by food and shelter prices, which have risen to levels not seen since the early 1980s, data from Statistics Canada shows.
Prices are rising rapidly worldwide, forcing central banks to raise interest rates despite their likely impact on growth.
‘Fear of the next six months’
“The downsides outweigh the benefits for growth stocks right now, and the market is trying to decide how bad it’s going to get,” said Liz Young, head of investment strategy at SoFi.
“The market is scared for the next six months. Maybe we’ll find out it doesn’t have to be that scared, and markets tend to overreact to the downside.”
Rising inflation, the conflict in Ukraine, protracted supply chain turmoil, pandemic-related lockdowns in China and monetary policy tightening by central banks have weighed on financial markets of late, fueling concerns about a global economic slowdown .
Wells Fargo Investment Institute said Wednesday (local time) it expects a mild recession in the US in late 2022 and early 2023.
Brent oil futures fell 2.7 percent to $109 a barrel.
Federal Reserve Chairman Jerome Powell promised Tuesday that the U.S. central bank will raise interest rates as high as necessary to end a rise in inflation that he said was threatening the bottom line of the economy. .
Traders are anticipating a 50 basis point rate hike by the Fed in June and July.
Spot gold held steady at $1,815.83 an ounce.
Oil prices fell in volatile trading as markets weighed in on expectations that China will ease COVID-19 restrictions against an unexpected drop in US crude inventories as refineries processed more crude.
Brent oil futures fell 2.4 percent to $109.
ABC/Reuters
Posted † updated
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