Blood bath deepens as ASX hits correction territory on looming rate hikes: Shares close 1.8% lower

Market Reports

by Melissa Darmawan

Aussie shares fell for four straight days after closing in correction territory led by a deep sell-off in technology shares. The local bourse plunged into a bloodbath as traders jostled with the idea of a lift-off in interest rates on high-flying growth stocks with valuations based on future profit growth.

The early rally was short-lived after market participants digested the hawkish tilt from Fed Chair Jerome Powell and the central bank’s plans to suppress hot inflation sitting at 40-year highs.

The highly anticipated outcome from the Fed followed from news back home that Australia’s trimmed annual inflation figures climbed to seven year highs, with economists forecasting interest rate hikes to be brought forward from 2024, and the end of the bond purchase program in the first board meeting of 2022 next Tuesday.

Across the Tasman, traders also digested New Zealand’s annual inflation rate jump to 5.9 per cent, its highest in 32 years as pressure looms on the NZ Reserve Bank to continue hiking interest rates.

As traders mull on the imminent withdrawal of the massive monetary stimulus that has kept the financial system afloat in cash since the pandemic hit, the early rally was short-lived as the fall deepened for the technical definition of a “correction” to emerge. The record high of 7,628 in August last year was countered by a 10.4 per cent close from this peak.

Meanwhile, BHP (ASX:BHP) jumped 1.4 per cent at $45.67 after the UK court gave its tick of approval for the miner’s plan to unify its listing on the ASX. Contributing to the high volume day, fund managers, ETF providers contributed to the turnover ahead of the last day of trade for its Plc stock on London’s FTSE. Shares in Rio Tinto (ASX:RIO) popped 2.1 per cent at $109.29, while Fortescue Metals Group (ASX:FMG) closed 0.1 per cent lower at $19.48.

The energy sector propped up the market supported by the price of crude as geopolitical concerns over Ukraine induced fears of tight supply. Woodside Petroleum (ASX:WPL) rose 2.5 per cent at $24.73, Beach Energy (ASX:BPT) surged 8.8 per cent at $1.42, while Santos (ASX:STO) closed 3.6 per cent higher at $6.96.

The technology sector was slammed with Block (ASX:SQ2) tanked 5.4 per cent $150.73, Wisetech (ASX:WTC) sank 9.9 per cent at $43.31 while Xero (ASX:XRO) tumbled 6.7 per cent at $104.69.

Elsewhere, banks broadly fell with ANZ Banking Group (ASX:ANZ) adding 1.1 per cent at $27.07 while its peers tanked. Macquarie Group (ASX:MQG) dived 3.1 per cent at $179.80, Commonwealth Bank of Australia (ASX:CBA) fell 1.8 per cent at $93.78, National Australia Bank (ASX:NAB) lost 0.4 per cent at $27.25 while Westpac Banking Corporation (ASX:WBC) closed 0.3 per cent lower at $20.16.

Gold miners fell also as the price of the precious metal declined with Evolution Mining (ASX:EVN) dived 11.3 per cent at $3.46, Northern Star (ASX:NST) backpedaled 8.2 per cent at $8.52, while Newcrest Mining (ASX:NCM) dropped 5.9 per cent at $22.96.

As risk sentiment went sour, pain for investors deepened with bear market territory in sight in Asian markets. Volatility remains on the cards as market participants cement the reality that amid reporting season and continued economic news in the horizon, they have woken up to the turmoil that bond markets felt shy of a month ago.

Tonight, the US gross domestic products growth numbers are due with economists expecting an expansion of 5.5 per cent for the December quarter. If this figure comes in better than expected, it could be quite fruitful for markets with some green back on the cards. The weekly jobless claims figures are also due along with US home sales. On the earnings front, Apple is set to report as well as Atlassian, McDonald's, Dow, Nucor, and Southwest Airlines. All of this could create vulnerability on the major indexes if the figures come in below expectations. The interplay and the mix of data poises another interesting session ahead.

At the closing bell, the S&P/ASX 200 was 1.8 per cent or 123.30 points lower at 6,838.30.

Futures

The Dow Jones futures are pointing to a fall of 367.00 points.
The S&P 500 futures are pointing to a fall of 55.75 points.
The Nasdaq futures are pointing to a fall of 220.50 points.
The SPI futures are pointing to a fall of 211 points when the market next opens.

IPO

Haranga Resources (ASX:HAR) has listed on the ASX today. Their shares issued at $0.20, started trading at $0.25 and are closed at $0.26.

Best and worst performers

The best-performing sector was energy, up 2.1 per cent. The worst-performing sector was information technology, down 4.9 per cent.

The best-performing stock in the S&P/ASX 200 was Beach Energy (ASX:BPT), closing 8.8 per cent higher at $1.42. It was followed by shares in Platinum Asset Management (ASX:PTM) and AusNet Services (ASX:AST).

The worst-performing stock in the S&P/ASX 200 was Evolution Mining (ASX:EVN), closing 11.3 per cent lower at $3.46. It was followed by shares in Silver Lake Resources (ASX:SLR) and Codan (ASX:CDA).

Asian markets

Japan's Nikkei has lost 3.3 per cent.
Hong Kong's Hang Seng has lost 2.6 per cent.
China's Shanghai Composite has lost 1.2 per cent.

Commodities and the dollar

Gold is trading at US$1813.85 an ounce.
Iron ore is 0.2 per cent higher at US$138.10 a ton.
Iron ore futures are pointing to a rise of 0.97 per cent.
Light crude is trading $0.77 lower at US$86.58 a barrel.
One Australian dollar is buying 70.74 US cents.

Are you a 708 sophisticated investor?

A sophisticated investor is defined under Section 708 of the Corporations Act (net assets of $2.5 million or annual incomes in excess of $250,000).

They are eligible to receive information regarding wholesale investment opportunities that are not available to regular or retail investors.

Please subscribe if you would like to be alerted to these types of opportunities.