Stocks fall as rate outlook darkens – The Market Herald

The equity market suffered its biggest setback in three months after surprisingly strong US inflation data forced investors to reassess the outlook for interest rates.

Stock markets from Europe to Asia fell sharply as risky assets plunged and bond yields and the US dollar surged. The selloff on Wall Street was the ninth-worst in history, according to Bloomberg.

The S&P/ASX 200 fell almost 3% this morning before narrowing its fall to 181 points or 2.58%. The drop was the largest since June 14.

All 11 sectors fell. Only five of the 200 component companies in Australia’s benchmark index advanced. The dollar fell to two-year lows.

What moved the market

Australian investors lay down complacently expecting August US consumer prices to confirm the downward trend in inflation since June. They woke up to a horror show after headline inflation rose and core inflation rose by twice consensus expectations.

The S&P500 plunged 4.32% to its worst loss in more than two years as economists forecast bigger rate hikes this year.

“Before the inflation release, the interest rate market was pricing in rate hikes of 75/50/25 basis points in September, December and November, which would have seen the fed funds rate end the year in a range of 3.75 to 4%.After the inflation release, the interest rate market evolved into a sequence of 75/75/50 basis point rate hikes that would take the fed funds rate to a year-end range of 4.25-4.50%,” said analyst Tony Sycamore. market at City Index.

The Dow fell 1,276 points or 3.94%. The Nasdaq Compound shed a 5.16 percent eye watering.

Australian stocks fell as analysts reassessed the outlook for domestic rates. Japanese bank Nomura has raised its forecast for next month RBA meeting to an increase of half a percentage point from a previous forecast of a quarter of a percentage point. The bank also raised its forecast for the top of the cycle to 3.5% in February from 3.1% in December.

August use Tomorrow’s report could intensify the pressure on the Reserve Bank if it turns out to be stronger than expected. Economists expect employment growth of around 35,500, leaving the jobless rate steady at 3.4%, its lowest level in 48 years.

“The employment situation in Australia is very optimistic and the job market should remain robust, thanks to the labor shortage the world is currently facing. Unemployment is at an all-time high, and although August jobs data shows slight market contraction as seen in July, RBA’s hawkish stance is unlikely to change,” said Kunal Sawhney, managing director of research group Kalkine.

Despite the magnitude of today’s drop, the index was still higher than it was last Wednesday. The ASX 200 closed at a seven-week low this session.

winner’s circle

The winner’s podium was a lonely place for much of the session. computer sharing was the only stock in Australia’s benchmark to rise in the first hour. The equities ledger finished best in class with a slight rebound of 1.19% after a sharp decline yesterday.

ResMed turned positive late in the morning, up 0.29% as traders sought protection from the carnage among risky assets.

Other gainers on the day were miners: Coronado +0.89%, Whitehaven Coal +0.24% and South32 +0.23%.

Apart from the index, Australian Pacific Coal jumped 33.33% following a proposed joint venture by private company Tetra Resources and Javelin Private Capital. The bidders are seeking to establish a joint venture and agreement to manage the Dartbrook Coal Project in the Hunter Valley. The AQC board said the proposal was non-binding, conditional and at an extremely early stage.

Altech Chemicals rallied 31.25% on the announcement of a joint venture with a “world-leading German battery institute” to develop solid-state batteries. Altech will hold 75% of the company’s shares, with Fraunhofer IKTS holding the remaining 25%.

Doghouse

Dependent on loan real estate stocks led the selloff as bond yields jumped on the expectation that official rates will go much higher. The yield on ten-year Australian government bonds climbed seven basis points to 3.656%.

Industrial property giant Goodman Group fell 5.03%. Charter Hall Group lost 4.82%, Stockland 4.7% and Abacus Property 5.78%.

Technology was the day’s other big loser for similar reasons: higher borrowing costs mean lower valuations. Megaport slipped 10.01%, BrainChip 6.47% and Xero 4.88%.

Other growth stocks to feel the heat included Clinuvel -6.91%, Zip Co -6.42% and Novonix -5.35%.

The ASX gold The index fell 3.8% after precious metals failed to protect themselves from market turmoil. Gold fell 1.9% overnight and was down another 0.3% this morning.

Gold Road Resources lost 7.19%, West African Resources 6.56%, Regis Resources 5.93% and Silver Lake Resources 5.75%.

A dispute with a joint venture partner has arisen Lake resources down 16.54%. The lithium miner said it was in conflict with Lilac Solutions over the timeline for achieving milestones at the Kachi pilot plant in Argentina.

Rio Tinto announced a joint venture with its biggest customer, China Baowu Steel, to develop a $2 billion iron ore project in the West Pilbara. Construction is expected to begin early next year, with production to follow in 2025. The stock price was down 1.98%.

The big four banks lost between 1.85 and 3.55%. Westfarmers lost 4.25%, Transurban 3.6% and Coles 3.47%.

Other markets

Asian markets joins the global retreat. The Asia Dow fell 2.42%, China’s Shanghai Composite 0.95%, Hong Kong’s Hang Seng 2.57% and Japan’s Nikkei 2.62%.

S&P 500 Futures Contracts rebounded four points or 0.1%.

Oil added to his overnight loss after a brief morning rally faded. Brent crude fell 53 US cents or 0.6% to US$92.64 a barrel.

Gold extended last night’s retreat, falling US$5.90 or more than 0.3% to US$1,711.60 an ounce.

The dollar plunged more than 2% overnight and continued to drop this afternoon. The Aussie was recently down 0.2% at 67.27 US cents.

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