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Bloodbath: ASX suffers $50b wipeout after Wall Street dives
By Penry Buckley
Welcome to your five-minute recap of the trading day.
The numbers
The Australian sharemarket has suffered its largest single day drop since March last year, with more than $50 billion wiped off the bourse’s value on Friday after a plunge on Wall Street.
The S&P/ASX 200 closed 2.1 per cent lower, dropping 171.50 points to 7943.20, a steep decline after it added 0.3 per cent and closed at a record high in the previous session.
New data sent Wall Street plunging. Credit: AP
All sectors were tracking lower, with consumer discretionary dropping most sharply, by 3 per cent, and real estate, information technology, financials and energy all shrinking more than 2 per cent. Utilities experienced the mildest losses, trading 0.1 per cent weaker.
The lifters
Mining company Newmont Corporation was the biggest large-cap advancer, up 1.5 per cent, followed by Yancoal Australia, which rose 1 per cent. Fisher & Paykel Healthcare also benefited from modest gains of 0.5 per cent.
In technology, fintech company Block performed against the grain, up 5.1 per cent to more than $100 a share, after announcing a $US3 billion ($4.6 billion) share buyback plan.
The laggards
Pilbara Minerals shrank the most of the large caps, down 6.5 per cent, followed by WiseTech (down 4.1 per cent), and Qantas, which dropped 4.1 per cent to lose all the gains it made on Wednesday after competitor Regional Express (Rex) announced it had entered voluntary administration.
The big four banks were all sharply lower, with CBA down 2.8 per cent at $132.46 a share on Friday, a day after hitting another record high of more than $138 a share. NAB was the biggest loser, down 4.1 per cent, while Macquarie Group shrank 2.2 per cent after it revealed it was considering a new hybrid raising offer.
Mining giants Rio Tinto and BHP were down, at 0.8 per cent and 1.2 per cent respectively, with energy heavyweights Woodside and Santos also in the red. Fortescue was down 1.3 per cent.
Sleep apnoea devices manufacturer ResMed was down 1.8 per cent despite rallying earlier in the session after the US and Australia-listed company reported fourth-quarter revenue rose 9 per cent after improved sales.
The Australian dollar continued to retreat overnight, shedding 0.7 per cent. It was fetching US65.20¢ cents at 4.32pm AEST.
The lowdown
Adam Dawes, senior investment adviser at Shaw and Partners, said market pullback was healthy after all-time highs.
“Overall, the market is comfortable that there are going to be no RBA hikes, with the hope that the US will cut rates in September.”
On Wall Street, stocks tumbled just a day after rallying on hopes the Fed is about to cut interest rates. The S&P 500 sank 1.4 per cent after a report showed US manufacturing activity was still shrinking, and its contraction is accelerating. Manufacturing has been one of the areas of the economy hurt most by high rates, and the report from the Institute for Supply Management helped extinguish what had been gains for US stock indexes early in the morning.
But Dawes said there was no reason to panic. “August is a volatile month for markets, and even further volatility then flows into September, when you get the news vacuum,” he said.
“The market gets too concerned about interest rates when they really should be worrying about earnings. And we’ve got August earnings season coming just around the corner.”
The Dow Jones dropped 1.2 per cent, and had been down more than 700 points earlier in the day, while the Nasdaq composite sank 2.3 per cent.
Traders are largely convinced that the Federal Reserve will cut its main interest rate in September. The only question for them is how many times it may cut this year and next.Credit: AP
The action was even stronger in the bond market, where the yield on the 10-year Treasury tumbled below 4 per cent, back to where it was in February. Besides the soft manufacturing data, reports earlier in the morning showed that the number of US workers applying for jobless benefits hit its highest level in about a year and that productivity for US workers improved during the spring.
Together, the data likely remove upward pressure on inflation and give more leeway for the Federal Reserve to cut interest rates. A day earlier, yields sank after Fed chair Jerome Powell gave the clearest indication yet that inflation may have slowed enough for easing of rates to begin in September.
Across the Atlantic, the Bank of England cut interest rates for the first time since the onset of the COVID-19 pandemic in early 2020. The FTSE 100 in London fell 1 per cent after erasing an earlier gain, and stock indexes were also weaker across much of Europe and Asia.
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With wires
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