Weakness in commodity stocks sent Australian shares to a three-week low on Thursday, as risk sentiment remained subdued due to uncertainty over the resolution of the U.S debt ceiling negotiations.
The S&P/ASX 200 index ended 1.1% lower to 7,138.2 points, slipping for the fourth straight session.
Investors took flight from riskier assets after the standoff between US President Joe Biden and his Republican counterpart on raising the debt ceiling did not reach a conclusion.
The possibility of the world’s largest economy facing a debt default has risen, with ratings agency Fitch putting the United States’ credit on watch for a possible downgrade.
“Although I remain optimistic that a resolution could be reached before the X-date, the prolonged negotiations have notably increased the risk of market disruptions and investor anxiety,” Hebe Chen, a market analyst at IG Australia, said.
On the domestic front, miners led losses on the bourse, diving about 2% due to continued weak iron ore prices in China, with Rio Tinto Ltd and BHP Group Ltd slipping 1.8% and 1.4%, respectively. Gold shares fell 3.1% to a seven-week low, with Newcrest Mining Ltd and Northern Star Resources Ltd each falling 1.9% and 3.8%.
Some analysts believe the “sell in May and go away” phenomenon could have played out in markets, considering the stocks have been said to underperform historically from May to October. The benchmark has lost about 2.3% in May as of date, its worst performance since February.
“It has not been so severe this year with ‘sell in May’,” Henry Jennings, senior market analyst at Marcustoday Financial Newsletter, said, “It seems more like a ‘drift in May’ or a ‘May Laise’.
Australian shares dragged by miners, pharma; NZ up on surprise central bank stance
The pace is picking up a little on the downside due to the debt negotiations.“ Separately, Treasury Wine Estates Ltd b emerged as the top benchmark loser, after it warned of inflation squeezing demand for its commercial-grade wine and driving up packaging costs.
Technology stocks provided some respite in an otherwise bleak benchmark, advancing about 2.4%, with accounting software provider Xero Ltd firming 2.1%.
New Zealand’s benchmark S&P/NZX 50 index fell 0.1% to finish the session at 11,959.9 points.