Australia: Shares close lower on recession fears after Fed hike

AUSTRALIAN shares gave up early gains to end lower on Thursday (Jun 16), as investors fretted over the possibility of a recession after the US central bank delivered its biggest interest rate hike in 28 years to curb soaring inflation.

The S&P/ASX 200 closed 0.2 per cent lower at 6,589.4 after rising as much as 1 per cent earlier in the session, extending its fall to a fifth session.

The US Federal Reserve approved a bigger but widely expected 75-basis-point rate hike on Wednesday to contain broadening inflationary pressure.

“The problem now is if we get a continuation of the rate rising, we run the risk of a severe economic downturn,” said Brad Smoling, managing director of Smoling Stockbroking.

“It is a very precarious time for markets because central banks are walking a thin line between letting inflation run high and allowing economic stimulation.”

In Australia, financial stocks reversed course to close 0.4 per cent lower, with 2 of the ‘Big Four’ banks shedding about 0.5 per cent each.

Healthcare stocks fell almost 0.9 per cent, with index heavyweights CSL and Ramsay Health Care down about 1 per cent and 1.3 per cent respectively.

Mining shares rose 0.7 per cent despite weak iron ore prices in China to break a 4-day decline. Sector majors Rio Tinto and BHP added 0.6 per cent and 0.1 per cent, respectively.

Energy stocks climbed about 0.5 per cent as Brent crude oil prices gained on tighter supplies.

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Among individual stocks, Link Administration sank as much as 13.1 per cent to a 2-year low after the competition regulator flagged concerns about Canadian firm Dye & Durham’s proposed US$2.48 billion deal to buy the share registry company.

New Zealand’s benchmark S&P/NZX 50 rose 0.1 per cent to 10,646.58. REUTERS