The Australian stock market has lost almost $60 billion in a single day, and Wall Street has lost trillions as investors fled amid concerns that more official interest rate hikes would not be enough to stem the rising inflation.
- The Dow Jones Industrial Average fell 3.1% to 32,998, the S&P 500 fell 3.5% to 4,147 and the Nasdaq fell 5% to 12,318.
- The Bank of England approved a rise of 0.25%, taking the reference interest rate to 1%
- The All Ordinaries Index fell 2.3% to 7,468, the ASX 200 Index lost 2.2% to 7,206 and the Australian dollar fell 0.4% to 70.83 cents.
The belated reaction in the US came a day after the US Federal Reserve raised the fed funds rate by 50 basis points and Fed Chairman Jerome Powell said there would be more rate hikes. half a percentage point in the coming months.
Traders raised their bets on a 75 basis point hike in June, although Powell almost ruled it out.
Rising interest rates, war in Ukraine, COVID-19 lockdowns in China are weighing on investor sentiment.
The Dow Jones Industrial Average slumped 3.1 percent to 32,998, the S&P 500 fell 3.5 percent to 4,147, and the Nasdaq slumped 5 percent to 12,318, reversing yesterday’s rally.
That is the lowest level for the Nasdaq since November 2020 and the lowest for the Dow since October 2020.
All 11 major S&P industrial sectors fell, with consumer discretionary stocks leading the declines.
The VIX volatility index rose to 31.20 points.
Big tech companies have been sold, including Google, Apple, Microsoft and Amazon, because higher interest rates will drive up their borrowing costs, and tech companies have relied on cheap financing to expand.
That caused $1.3 trillion ($1.8 trillion) to be wiped off the value of the world’s biggest tech companies.
Payments firm Block plummeted to a loss in the first quarter as prices for the bitcoin cryptocurrency declined.
Block had a net loss of $204 million, or 38 cents a share, compared with a profit of $39 million a year earlier.
Its shares lost 10 percent but recovered ground in after-hours trading as investors took a closer look at the results and liked what they saw.
Twitter was one of the few stocks to rise after billionaire Elon Musk lined up a diverse group of investors to back his $44 billion takeover bid for the social media platform.
They include Oracle co-founder Larry Ellison and a prince from Saudi Arabia.
The documents also show that Musk is in talks with Twitter founder Jack Dorsey to sell him some of his shares.
Australian stocks fell sharply after the Wall Street crash, with just five stocks rising on the ASX 200 by midday.
At the close, the market came off its lows.
The All Ordinaries Index fell 2.3 percent to 7,468, and the ASX 200 Index lost 2.2 percent to 7,206.
All 11 industry sectors finished in the red, led lower by technology, real estate investment trusts, healthcare companies and mining.
The benchmark index is down 3.1 percent for the week and 3.2 percent so far this year.
Burman Invest chief investment officer Julie Lee said nearly $60bn was wiped from the market’s value today with technology and health stocks bearing the brunt of the selloff.
“So in the tech space, where we see some companies not yet profitable, that is taking a huge hit because future growth is being discounted.”
The biggest loser in the ASX 200 was uranium producer Paladin Energy (-10.3%), followed by applications company Life360 (-9.5%) and cloud software company Xero (-9.1 %).
News Corporation fell (-7.8 percent), despite posting record revenue and profit in the third quarter.
The company posted $2.5 in revenue for the quarter, up 7 percent from the same period a year earlier, as its news media division continued to benefit from a rebound in the advertising market.
The best performers were medical device company Polynovo (+4.1%), Fisher & Paykel (+2.7%) and supermarket giant Coles (+1%).
Real estate firms REA Group (-8.1%) and Domain (-1.8%) took a hit in the market today as higher borrowing costs are bad for real estate demand.
REA posted a quarterly revenue increase to $278 million, compared to $226 million in the same period last year.
The company said the value of trial fees would be reduced by rising mortgage settlement rates.
All the big banks were down, even though a rising interest rate environment is good for them because it increases their income.
National Australia Bank (-2 percent) was the worst performer, followed by Commonwealth Bank (-1.3 percent), then Westpac (-0.8 percent) and ANZ (-0.6 percent).
Meanwhile, the Australian dollar sold off on the worsening local and global economic outlook, falling more than 2 percent overnight.
It fell below 71 cents on the dollar after the Reserve Bank lowered its unemployment forecasts and significantly raised inflation forecasts, saying inflation could hit 6 percent in December.
The RBA said further increases in interest rates were needed to contain inflation.
As of 4:50am AEST, the Australian dollar was down 0.4 percent at around 70.83 US cents.
Macquarie record profit
Investment bank Macquarie Group posted a more than halving rise in annual profit amid a surge in commodity prices due to the war in Ukraine.
Net profit for 2022 increased 56% from 2021, reaching a record $4.7 billion, with revenue from the international and commodity divisions contributing the largest share of revenue.
Investors get a final dividend of $3.50 per share for the half year, making a final dividend for the year of $6.22 per share, 40 percent franked.
Macquarie Group Chief Executive Shemara Wikramanayake said it was a good result despite increased volatility in commodities, including rising oil prices.
“We had the COVID recovery where demand for goods increased and we had some challenges on the supply side. Then we had the Russia and Ukraine issue,” Ms Wikramanayake said.
However, the Macquarie boss also warned that raw material revenues would drop “significantly” and acquisition deals would also drop in the current fiscal year.
Macquarie shares fell 7.8 percent on the profit warning.
In Hong Kong, the Hang Seng Index lost 3.6 percent to 20,052, while the Shanghai Composite fell 2 percent to 3,005.
Japan’s Nikkei 225 rallied after a morning slide and rose 0.7 percent to 27,004.
In Asian trade, Brent crude continued to rise.
It rose 1.1 percent to $112.05 a barrel, while spot gold fell 0.2 percent to $1,873.65 an ounce by 4:50pm AEST.
Bank of England rate hike
With inflation rising to 10 percent due to Russia’s invasion of Ukraine and China’s COVID-19 lockdowns, the Bank of England has raised its official interest rates to a 13-year high.
The UK central bank’s Monetary Policy Committee approved a 25 basis point hike by a majority of six to three, bringing the benchmark interest rate to 1 percent.
Its three dissenting members wanted a 0.5 percent increase because inflation has been running at 7 percent in the UK due to the higher cost of goods, especially fuel.
It was the fourth increase since December.
“Global inflationary pressures have intensified considerably following the Russian invasion of Ukraine,” the bank said.
“This has led to a material deterioration in the outlook for global and economic growth.”
The FTSE rose 0.1 percent to 7,503, Germany’s DAX fell 0.5 percent to 13,903, while the Paris CAC 40 lost 0.4 percent to 6,368.
Meanwhile, the pound tumbled as the BOE warned of the risk of a recession.
Aware , updated