Australia: Shares slump as inflation woes hint at more rate hikes
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AUSTRALIAN shares ended lower on Friday (May 6) amid a global sell-off with all sectors in red as renewed fears of a faster rate-hike cycle kept risk appetite in check after the country’s central bank raised inflation forecasts drastically.
The S&P/ASX 200 index was down 2.2 per cent at 7205.6, after losing 3.1 per cent in value this week to clock its worst week since October 2020. The benchmark witnessed its worst day since Feb 24.
The Reserve Bank of Australia warned core inflation could now hit 4.6 per cent by December, a startling 2 percentage points higher than its previous forecast made earlier this year.
Interest rate-sensitive technology stocks, which tracked a tepid Wall Street session, slumped 4.5 per cent to mark their fifth straight weekly loss.
Sector heavyweights Xero and ASX-listed shares of Block gave up 8.6 per cent and 1.7 per cent, respectively.
Traders are banking on central banks to control inflation without overstepping on growth with most economic indicators at extremes and beyond their control, JPMorgan global market strategist Kerry Craig said, referring to the poor performances in markets.
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Financials retreated 2 per cent, delivering their worst week since late February, with the “Big Four” banks slipping between 0.4 and 2 per cent.
Macquarie tumbled 7.6 per cent to its worst day since March 2020 after the financial giant flagged that earnings would decline despite posting a record annual profit.
“In Australia, markets are pricing in on as many as 10 rate hikes by the end of this year implying that cash rate would be somewhere around 3 per cent by 2023,” CommSec market analyst Steven Daghlian said.
The mining sub-index slid 2.1 per cent, with heavyweights BHP and Rio Tinto dropping 1.8 per cent and 1.9 per cent, respectively.
Biotech firm CSL, one of Australia’s largest companies by market value, lost 1.9 per cent in value this week.
New Zealand’s benchmark S&P/NZX 50 index fell 1.2 per cent to 11609.38 and saw its worst week since early March. REUTERS
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