Australia: Shares fall into correction territory after Fed signals hikes

[BENGALURU] Australian shares fell into correction territory on Thursday (Jan 27), driven by tech and gold stocks after the US Federal Reserve signalled interest rate hikes as early as March, with investors now looking to next week's Reserve Bank of Australia meeting.

The benchmark S&P/ASX 200 index closed lower for a fourth straight day, down 1.8 per cent at 6,838.3 - its lowest since April last year. The index is now more than 10 per cent below its August 2021 high and is on track for its worst month since March 2020.

With the Fed now likely to raise rates in March, Fed fund futures show traders pricing in as many as 5 hikes this year, more than the 4 they had in the run-up to the meeting.

It comes after Fed Chairman Jerome Powell warned that inflation remained above the central bank's long-run goal and supply chain issues might be more persistent than previously thought.

"It looks like next Tuesday's meeting from the RBA is going to be very important and interesting to see how they change their commentary," Steven Daghlian, a CommSec market analyst, said.

Already battered, Australia's tech stocks ended the day 5.1 per cent lower, taking losses so far this year to around 20 per cent.

Both Xero and Seek plunged close to 7 per cent.

Gold stocks dived 6.5 per cent, with top miner Newcrest falling 5.9 per cent.

On the other hand, supported by a stronger US dollar and tensions between Russia and the West over Ukraine, oil prices broke past US$90 a barrel at one point for the first time since 2014.

The lift helped Australia's energy stocks. Woodside Petroleum ended 2.5 per cent higher even after the company said it would take a US$138 million hit as it exits Myanmar.

New Zealand's S&P/NZX 50 index fell 1.1 per cent to 12,050.32, a day after it snapped a 5-day run of losses.

Annual inflation hit a 3-decade high in the fourth quarter, cementing a view that the central bank will look to tighten monetary policy further next month. REUTERS