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Australia: Stocks down on recession fears
[SYDNEY] Australian and New Zealand shares fell sharply on Thursday as investors sold off equities globally in search of safety after a drop in a US bond yield curve highlighted the risk of recession.
The yield on the US Treasury 10-year note briefly fell below the two-year yield, a pattern that is widely seen as an indicator of a looming recession.
The inversion, as it is known, last happened in 2007 and proved to be correct when the global financial crisis hit the following year.
The S&P/ASX 200 index sank 2.9 per cent to 6,408.1 points, its lowest level since early June. The benchmark had managed a 0.4 per cent gain on Wednesday after US President Donald Trump delayed tariffs on some Chinese imports, easing some fears over the escalating US-China trade war.
Worries of contagion gripped markets, with investors shifting money away from sectors such as financials and mining to the relative safety of gold.
Australia has proved in the past to be relatively resistant to global recessions and was one of the few developed economies that escaped the crisis in 2008. However, interest rates are now at record lows, limiting the tools that the central bank has at its disposal to combat weakness.
Australia's Big Four banks - Commonwealth Bank of Australia CBA.AX, Westpac Banking Corp WBC.AX, National Australia Bank NAB.AX and Australia and New Zealand Banking Group ANZ.AX - each slumped around 3 per cent.
Australian miners, which are highly dependent on continuous global growth for demand, were firmly in the red.
BHP Group and Rio Tinto dropped 2.8 per cent and 2.7 per cent, respectively.
New Zealand's benchmark S&P/NZX 50 index closed 1.3 per cent lower at 10,704.11.