Australia: Shares end lower on hawkish US Fed narrative

AUSTRALIAN shares fell on Friday (Oct 21), as losses in healthcare and financials outweighed strong performances by resource firms, while risk sentiment was dampened on the likelihood of a prolonged aggressive policy stance by the US Federal Reserve.

The S&P/ASX 200 index closed 0.8 per cent lower at 6,676.8 points, marking its second weekly loss. The benchmark closed 1 per cent lower on Thursday.

Global risk appetite remained tepid as comments from a Fed official reiterated the US central bank’s motive to sustain its aggressive rate-hike path to curb runaway inflation, even if it induces a recession.

Riskier assets in the recent past have faced pressure from a stronger US dollar and Treasury yields as both are considered safe-haven bets in times of economic uncertainty.

“The fact that US yields continued marching higher yesterday and have extended those gains today is a clear sign that the markets know the Fed means business regarding rate hikes,” said Matt Simpson, a senior market analyst from City Index.

Analysts believe any recovery in the local market could be short-lived due to a rising interest rate scenario.

“We may see a percent or two gain on certain days, and the next day that gain will disappear. Sustainable recovery is unlikely in the near future,” said Kunal Sawnhey, chief executive officer at Kalkine Group.

Australian financials, which occupy one-third of the bourse, led the losses for the day with a 1.2 per cent drop. The “Big Four” banks slipped between 0.9 and 1.7 per cent.

Healthcare stocks suffered a similar fate, falling nearly 1 per cent, with index leader CSL skidding about 1.5 per cent.

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Australia: Shares drop as financials drag on Federal Reserve rate-hike fears

The resources sector provided some respite, with the energy index jumping the most at 2 per cent. Sector majors Woodside Energy and Santos rose 2.4 per cent and 0.8 per cent, respectively.

Similarly, the gold index advanced 0.4 per cent, with Newcrest Mining and Northern Star Resources gaining 0.4 per cent and 0.6 per cent, respectively.

New Zealand’s benchmark S&P/NZX 50 index fell about 0.5 per cent to finish at 10,782.4 points. REUTERS