Australian shares fell to a two-month low on Wednesday, led by commodity and financial stocks, as fears of a global recession dominated markets ahead of a widely expected hefty rate hike from the US Federal Reserve.

The S&P/ASX 200 index closed 1.6% lower at 6,700.20, marking its third session of fall in four.

The benchmark rose 1.3% on Tuesday.

The Fed is widely expected to deliver a third straight rate hike of 75 basis points at the end of its two-day policy meeting later in the day.

Miners slumped 2.8% and were the top losers on the Australian benchmark, as iron ore prices fell amid concerns that aggressive tightening by central banks could tip the global economy into recession, dampening demand for commodities.

Concerns over China’s persistent zero-COVID policy and ailing property sector also weighed on iron ore prices.

“The property play is going to take months to allow demand to reach back at normal levels,” said Azeem Sheriff, markets analyst at CMC Markets. Data showing a week-on-week drop in Australian iron ore exports highlights that demand concerns still persist, he said.

Though China has relaxed some COVID-19 curbs, it will take some time for demand to gain traction and the government to fully support its economy, he added. Shares of Rio Tinto, BHP Group and Fortescue Metals fell between 3.1% and 4.4%.

Aussie shares bounce back with all eyes on Fed meeting

Gold stocks closed 2.2% lower after hitting their lowest since October 2017, while financials fell 1.2% with the big four bank shedding between 0.7% and 1.5%. Tech stocks fell as much as 2.4% to their lowest since July 20 after a broad sell-off on Wall Street.

TechnologyOne was the top laggard on the sub-index, shedding 4.4%, while Australia-listed shares of Block Inc fell 3.7%.

New Zealand’s benchmark S&P/NZX 50 index fell 0.6% to 11,498.95.