Australia: Commodity stocks drag shares to 2-month low ahead of Fed decision

AUSTRALIAN shares fell to a 2-month low on Wednesday (Sep 21), 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 per cent lower at 6,700.2, marking its third session of fall in 4. The benchmark rose 1.3 per cent on Tuesday.

The Fed is widely expected to deliver a third straight rate hike of 75 basis points at the end of its 2-day policy meeting later in the day.

Miners slumped 2.8 per cent 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 per cent.

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Australia: Shares fall as commodity, bank stocks weigh; Fed rate decision in focus

Gold stocks closed 2.2 per cent lower after hitting their lowest since October 2017, while financials fell 1.2 per cent with the Big Four banks shedding between 0.7 and 1.5 per cent.

Tech stocks fell as much as 2.4 per cent to their lowest since Jul 20 after a broad sell-off on Wall Street.

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

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