Australian shares confirmed a correction on Tuesday with their biggest fall in more than two years, dragged lower by growing concerns of interest rate hikes leading to a global recession.
The S&P/ASX 200 index closed about 3.6% lower at 6,686 points, its lowest level since Feb. 26, 2021.
The benchmark is down more than 12% from its peak scaled this year, which confirms the market’s correction territory.
All eyes are now on the outcome of the US Federal Reserve’s policy meeting on Wednesday, where investors are expecting a 75 basis point rate increase.
A red-hot US inflation reading last week has increased concerns that possible hefty rate hikes by the Fed could trigger a recession in the world’s largest economy, weighing heavily on Wall Street’s main indexes overnight.
That also dragged the Australian benchmark lower on Tuesday, with losses seen across most sub-indexes.
Australian shares set to record worst week in over 1-1/2 yrs after RBA rate hike
“It is going to be a long climb out and markets will be cautious going forward,” Henry Jennings, a senior analyst at Marcustoday Financial Newsletter said.
Among individual sectors and shares, Zip Co Ltd and ASX-listed shares of Block Inc led losses on the benchmark, shedding about 16% and 15% each.
The technology sub-index hit a six-week low. Miners dropped as much as 6.8% to a near one-month low, as iron ore prices weakened after new COVID-19 outbreaks fuelled worries of renewed lockdowns in China, diluting demand in the world’s largest steel producer. Heavyweights BHP, Rio Tinto and Fortescue Metals fell between 4.2% and 8.5%.
“It seems as if fresh COVID-19 outbreaks in China have clouded the earnings outlook for Australian miners, who mostly export to the country,” said Kalkine Group CEO Kunal Sawhney.
Financials gave up about 3.7%, hitting a more than four-month low, with the “Big Four” banks sliding 2.7%-5.2%.
New Zealand’s benchmark S&P/NZX 50 closed 2.9% lower at 10,635.41, its lowest since May 7.
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