ASX down nearly 4% after Wall Street sells on inflation fears, S&P 500 falls into bear market

Australia’s equity market plunged on Tuesday, wiping tens of billions of dollars off the value of stocks after global markets tumbled on fears that aggressive interest rate hikes by the US central bank could push America from North towards recession.

The All Ordinaries index closed down 3.7% at 6,881, while the ASX 200 index fell 3.6% to 6,686. That’s a paper loss of $87.5 billion. .

The ASX 200’s worst performer was buy now, pay later, Zip (-15.9pc), followed by Block (-15.1pc), gold, nickel and nickel miner Chalice Mining. WA-based cobalt (-14.2 pc).

Communications infrastructure provider Uniti Group (+0.4pc) was among the only handful of companies to make it into the top 200 companies.

Tech stocks were the hardest hit, after a sell-off on Wall Street.

“Locally, we are seeing a lot of pain in the tech sector because we’ve seen the Nasdaq really down over the past few days,” Jun Bei Liu, portfolio manager at Tribeca Investment Partners, told ABC News.

“Probably one of the biggest drops is in the Fintech base. We’re seeing it down over 18% in some places. There’s been a big sell-off.

Michael McCarthy, chief strategy officer of Tiger Brokers Australia, warned investors to be very careful about viewing the current selloff as a buying opportunity as there is more pain ahead.

“As a market professional, I’m forced to say ‘don’t buy this dip, there’s a lot of recalculations to come,'” he told ABC News.

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Recession risks rise as central banks slowly change interest rates, warns Marc Faber(Catherine Robinson)

“One of the worst off-peak days”

In the first twenty minutes of trading, the All Ordinaries index fell 5.4%, or 384 points, to 6,761, below the 7,000 mark.

The ASX 200 lost 5.2% of its value to 6,570 after falling below 7,000 on Friday.

All sectors ended in the red, with the ASX Resources Index – which contains the country’s biggest miners, such as BHP and Rio Tinto – losing 4.4%.

The major banks recorded steep falls, with National Australia Bank (-4.4%) and ANZ (-4.6%) doing the worst, followed by Commonwealth Bank (-2.8%) and the Westpac (-3.7%).

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CommSec said the market is near a February 2021 low.

It has fallen 13% from its April 2022 record.

“This is one of the worst down days in 20 years, excluding 2008, the GFC and the COVID panic in 2020,” said Jamie Hannah, Deputy Head of Investments and Capital Markets. at VanEck, at ABC News.

“I guess it would continue, based on a number of factors…we have the war in Ukraine, we still have COVID lockdowns, we have supply chain issues, we have interest rates in rise and we have what would otherwise be called high inflation.”

The Australian dollar fell below 70 US cents earlier amid the stock market rout, to a low of 69.20 US cents, as the greenback hit its highest level in two decades on expectations of bigger rate hikes from the Fed.

By 4:36 p.m. AEST, it had reached its morning low and was buying around 69.61 US cents.

Wall Street Rout

Wall Street plunged as investors soared after U.S. consumer inflation hit a 40-year high on Friday amid fears that aggressive interest rate hikes could lead to a recession.

The benchmark S&P 500 closed 3.9% lower at 3,750 after government data on Friday showed annual inflation hit a 40-year high of 8.6%.

Meanwhile, the US central bank, the Federal Reserve, is expected to raise official interest rates again later this week, possibly as much as 0.75%.

Traders are betting that US rates could peak at 4% next year.

The S&P 500 is down nearly 22% from its January 3 closing high, officially confirming a bear market, down.

The index is therefore in a bear market and has fallen by a fifth since its peak in January.

Over the past four trading days, the index has fallen, with all major industry sectors down sharply, including tech giants Apple (-3.8%), Microsoft (-4.2%) and Amazon (-5.4%).

Global markets are under pressure due to soaring inflation, the war in Ukraine and a tighter global supply chain.

The Dow Jones Industrial Average fell 2.8% to 30,517 and the Nasdaq Composite fell 4.7% to 10,809.

Meanwhile, the CBOE Volatility Index, known as the VIX, closed at its highest level in more than a month.

The spread between the yields (yields) of 2- and 10-year US Treasury bonds reversed for the first time since April, a sign that investors expect a recession.

Yields on 10-year US Treasury bonds rose to 3.44%, their highest level since April 2011.

In Europe, the FTSE 100 index fell 1.5%, to 7,206, the DAX in Germany lost 2.4%, to 13,427, and the CAC 40 in Paris fell 2.7%, to 6,022.

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Calls for crypto regulation after ‘stablecoin’ collapse(David Chau)

Cryptocurrency has not escaped the stock market contagion either.

Bitcoin plunged 14% to $22,725 per digital coin after major U.S. cryptocurrency network lending firm Celsius Network froze withdrawals and transfers citing ‘extreme’ market conditions .

Additionally, US crypto exchange Binance was sued by an investor over the collapse of the Terra USD stablecoin, which the investor said was marketed as a safe investment.

As of 4:45 p.m. AEST, spot gold was up 0.5% at US$1,828.7 an ounce, above overnight lows.

Brent crude oil rose 0.8% to US$123.30 a barrel.

Additional reporting by Alicia Barry and David Chau.

ABC/Reuters

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