Australian shares tumbled at the open as investors fear aggressive monetary policy tightening could push the global economy into recession.
Key points:
- The ASX 200 suffered the worst week last week since COVID
- The Dow Jones Industrial Average fell 0.13%, the S&P 500 added 0.22% and the Nasdaq Composite jumped 1.43%
- The pan-European STOXX 600 index rose 0.1% in volatile trade, but ended last week down 4.6%
The ASX 200 was steady at 6,474 at 10:24 a.m. AEST.
Meanwhile, the Australian dollar was up at 69.49 US cents.
All 11 sectors were down over the past week. Although little changed, the consumer staples sector was the best performer early in the trade. It was down 3% in the past five days.
Pointsbet (+11.2pc), Harvey Norman (+4.8pc) and Home Consortium (+3.6pc) were the best performers.
Meanwhile, Bega Cheese (-6.9pc), De Gray Mining (-6.1pc) and Beach Energy (-5.9pc) were the worst performers.
Brent crude oil was up, trading at US$113.77 a barrel, as of 10:31 a.m. AEST.
Biggest weekly loss since 2020
On Friday, global stocks closed their biggest weekly decline since the March 2020 pandemic meltdown as investors worried that a tightening of anti-inflation central bank monetary policy could hurt economic growth.
The biggest rate hike by the US Federal Reserve since 1994, the first such Swiss move in 15 years, a fifth UK rate hike since December and a decision by the European Central Bank to support the indebted south have in turn shaken the markets.
The Bank of Japan was the only outlier in a week that silver prices rose globally, sticking to its strategy on Friday of pinning 10-year yields near zero.
After steep early losses, global equities stabilized somewhat to end Friday’s session down just 0.12%.
The weekly decline of 5.8% was the largest since the week of March 20, 2020.
Wall Street’s Dow Jones Industrial Average fell 0.13%, the S&P 500 added 0.22% and the Nasdaq Composite jumped 1.43%.
For the week, the S&P 500 fell 5.8%, also its biggest drop since the third week of 2020.
“Inflation, war and lockdowns in China have derailed the global recovery,” Bank of America economists said in a note to clients, adding that they saw a 40% chance of a US recession. United next year as the Fed continues to hike rates.
The Fed said on Friday that its commitment to fighting inflation was “unconditional.” Fears that its rate hikes could trigger a recession have supported Treasury prices and slowed the rise in yields, which fall when prices rise.
Ten-year Treasury yields fell to 3.22944% after hitting an 11-year high of 3.498% on Tuesday.
“The political dynamics of global central banks are one-way”
Southern European bond yields fell sharply after more detailed reports from ECB President Christine Lagarde on the central bank’s plans.
“The more aggressive line from central banks is adding headwinds to both economic growth and equities,” said Mark Haefele, chief investment officer at UBS Global Wealth Management.
In Asia, MSCI’s broadest index of Asia-Pacific stocks outside Japan fell to a five-week low, led by selling in Australia.
The Japanese Nikkei fell 1.8% and headed for a weekly decline of nearly 7%.
Bonds and currencies were jittery after a rollercoaster week.
The yen tumbled after the Bank of Japan stuck to its ultra-accommodative policy.
The yen fell 2.2% on Friday night, supporting the US dollar, which rose 0.73% against a basket of major currencies.
The pound fell 1% in New York as investors focused on the spread between US and UK rates.
The Bank of England opts for a more moderate approach than the Fed.
“Markets may simply permanently adjust to a prospect of higher global policy rates…because the policy momentum of global central banks is one-sided.”
ABC/Reuters
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