$100 Billion Wiped from Australian Sharemarket Amid US Recession Fears

 $100 Billion Wiped from Australian Sharemarket Amid US Recession Fears

 $100 Billion Wiped from Australian Sharemarket | The Enterprise World

Australian Sharemarket Faces Significant Losses

In a dramatic turn of events, the Australian sharemarket has seen a staggering $100 billion wiped off its value over the past two sessions. This sharp selloff comes as investors react to growing fears that the United States economy might be headed for a recession. The S&P/ASX 200 index dropped 231.3 points, or 2.91%, to 7711.9 by 12:15 PM AEST, marking its lowest point in two months.

All 11 sectors experienced declines on Monday, with tech stocks taking the hardest hit, falling 4.9% by midday. Consumer staples and healthcare stocks saw the smallest drops, down 1.89% and 1.61% respectively. Financial stocks were significantly impacted, with Westpac, ANZ, NAB, and CBA all plummeting by over 3.75%. Major miners BHP and Fortescue also retreated, although Rio Tinto managed a slight gain of 0.35% after initial losses.

US Economic Woes and Their Ripple Effect

The catalyst for this selloff was a report on US employment data released last week, which showed a faster-than-expected rise in the jobless rate. This, coupled with weaker-than-expected reports on US manufacturing activity, spooked investors. The high-interest rates have severely affected US manufacturing, further exacerbating fears of an impending recession.

On Wall Street, the S&P 500 sank 1.8% on Friday, marking its first back-to-back losses of at least 1% since April. The Dow Jones dropped 1.5%, and the Nasdaq composite fell 2.4%, triggering a global wave of stock selloffs.

Investors are now increasingly concerned that the Federal Reserve might have kept its main interest rate at a two-decade high for too long. Despite Federal Reserve Chair Jerome Powell’s previous indications that inflation had slowed enough to potentially justify rate cuts, the Australian sharemarket is now betting on a 70% probability of a significant rate cut by September. However, Powell stated that such a deep reduction is “not something we’re thinking about right now.”

Local and Global Market Reactions

Back on the local bourse, Pro Medicus was the worst-performing large-cap stock, falling 6.59%, followed by Wise Tech Global and Xero, which dropped 5.86% and 5.64%, respectively. Conversely, Resmed, TPG Telecom, and Rio Tinto were among the few large-caps that advanced, with Resmed up by 3.87%.

In the commodities market, spot gold fell 0.1% to $US2443.24 an ounce, Brent crude declined 2.5% to $US77.50 a barrel, and iron ore rose 0.7% to $US103.35 a tonne.

Local investors are now keenly awaiting the Reserve Bank of Australia’s decision on the cash rate, expected on Tuesday. Governor Michele Bullock is anticipated to hold the cash rate steady at 4.35%, following the Australian Bureau of Statistics’ report showing a slight decrease in core inflation.

Globally, big technology companies have also felt the pinch, with Amazon falling 8.8% after reporting weaker-than-expected revenue. Intel had its worst day in 50 years, dropping 26.1% after a dismal profit report and suspension of its dividend payment. Conversely, Apple showed resilience with a slight gain of 0.7%, thanks to better-than-expected profit and revenue reports.

The recent losses in tech stocks have dragged the Nasdaq composite 10% below its record high set last month, marking a “correction” in trader terms. Despite the market turmoil, some experts believe the market may be overreacting and that there isn’t enough evidence to declare the current economic data a death knell for the economy.

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