The Business Times

Australia: Shares end at 2-month low as rate-hike fears loom

Published Wed, Sep 7, 2022 · 03:43 PM

Australian shares closed at a near 2-month low on Wednesday (Sep 7), as traders assessed that strong domestic economic data and US non-manufacturing reading could prompt central banks to further tighten their monetary stimulus.

The S&P/ASX 200 index ended 1.4 per cent weaker at 6,729.3, its lowest closing level since Jul 19. The benchmark dropped 0.4 per cent on Tuesday.

Data from the Australian Bureau of Statistics showed gross domestic product rose 0.9 per cent in the second quarter, in line with forecasts.

While that reinforced views the economy was not in recession, it also added to expectations the central bank would not be slowing the pace of interest rate hikes any time soon.

The Reserve Bank of Australia on Tuesday raised its cash rate 50 basis points to a 7-year high of 2.35 per cent and markets are leaning toward another half-point hike in October.

Data showed that US services industry also picked up in August for the second straight month, reinforcing bets for rate hikes.

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“The market sentiment at the moment is bleak. Although the effects of rate hikes are yet to be felt, markets are already factoring in a recessionary situation,” said Kunal Sawhney, chief executive of Kalkine Group.

“ASX 200 is exhibiting no signs of returning to the 7,000 level in the near term. This dull saga could continue for a longer-than-expected period,” he added.

Australian banking stocks fell 2 per cent to their lowest level in nearly 2 months and led losses on the benchmark. The “Big Four” banks declined between 1.4 per cent and 3.1 per cent.

Mining shares tracked weak iron ore and base metal prices to slide 2.1 per cent.

Sector majors BHP Group, Rio Tinto and Fortescue Metals Group fell between 1.5 per cent and 2.7 per cent.

Energy shares slumped 2.9 per cent after oil prices fell to a 7-month low on demand fears. Gold stocks retreated 1.8 per cent on weaker bullion prices.

Technology and healthcare stocks were the only gainers on the benchmark, rising 0.3 per cent and 0.2 per cent, respectively.

New Zealand’s benchmark S&P/NZX 50 index fell 0.4 per cent to finish the session at 11,548.3. REUTERS

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