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Australian share market suffers $25 billion loss as ‘war, inflation, rate hikes’ hit global markets

The Australian share market has lost $25 billion as it follows Wall Street lower on concerns about rate hikes triggering a global economic slowdown.

The All Ordinaries index opened down 2.6 per cent. That worked out to a loss of $64 billion in value from the previous close.

The benchmark ASX 200 was also down 2.4 per cent on open.

A loss of more than 2 per cent is generally considered a significant move.

The All Ords had wall back some losses and closed down 1 per cent. That still worked out to a market loss of around $25 billion.

The ASX 200 closed down 1 per cent to 7,051.

Tony Sycamore, senior market analyst at City Index, noted that there was “a massive volume” going through ASX 200 futures this morning.

The main losers on the ASX 200 included AUB Group (-9.9pc), Block (-8.5pc), Chalice (-6.7pc), Paladin (-4.8pc) and Ramelius (-3.4pc).

Oil stocks were also down, including Paladin and Beach, as the price of crude dropped overnight.

Market analyst Clifford Bennett said this drop “has been building for several months.”

“The reasons for it have been around for a while,” he said in a briefing note.

“When combined, equity markets have no way through.”

Among the top movers were Polynovo (+15.6pc), Pendal Group (+8.1pc) and Life360 (+5.8pc).

Recreation and personal services rebound

Business conditions continued to strengthen in April, while confidence eased but remained above its long-run average, NAB Monthly Business Survey finds.

The gains came on the back of a long-awaited recovery in the recreation and personal services sector, where conditions rose 20pts.

Both confidence and conditions now look fairly strong across most industries, with the exception of transport and utilities and construction, where cost pressures have been most acute.

“Conditions in most industries now look fairly strong although conditions in construction and in transport and utilities are being held down by negative levels on the profitability index, a sign that cost pressures could be beginning to take a toll on margins,” said NAB Group chief Economist Alan Oster.

“Across the states, there was a large improvement in Queensland, and New South Wales and South Australia also made gains, although conditions in Victoria eased.

Wall Street losing on hike concerns

This follows sharp losses on Wall Street overnight, as concerns there about interest rate hikes triggering a general economic downturn weighed on stocks, especially technology.

The S&P 500 had a particularly bad run, dropping below 4,000 points during its first day of trade for the week, which is the first time it’s done that since March 2021.

Meanwhile, the Dow Jones lost 650 points, or 2 per cent, while the S&P 500 and Nasdaq fared worse with losses of 3.2 and 3.4 per cent respectively.

That is happening as analysts predict more rate hikes in the US, and the nation awaits its next round of inflation data.

US inflation has been soaring and rate hikes are generally seen as one way to control price hikes.

It was one of the main motivations for the Reserve Bank of Australia also rising rates for the first time in 11 years last week, earlier than previous forecasts.

Inflation data is out again later this week in the United States. Depending on whether it is still rising significantly, the US federal reserve may seek to continue hiking rates.

“We don’t normally pay too much attention to short-term market movements, but there’s some concern brewing in markets that we might be on the cusp of a significant event,” market analyst Peter Esho said in a briefing note today.

“Ultimately our view is that each and every time the US Federal Reserve seeks to raise rates, the economy and growth will break and send us back to square one.

“The most vulnerable sectors of the economy are at risk, tech for example is already breaking with lay-offs being announced by the hour.”

“The markets are more intertwined than 2008. Leverage is everywhere including crypto markets, which are off grid. The risk is in the unknown.”

Ten-year US Treasury yields were around 3 per cent. They had gotten higher, towards 3.4 per cent earlier in trade, but wall back. This is generally seen as the market predicting interest rate rises.

Tech stocks suffered big losses in the United States, including Facebook’s owner Meta, Google’s parent Alphabet, Amazon, Apple and Netflix, all with losses above 2.8 per cent.

Energy stocks were also down on a lower oil price.

European markets also closed in the red, with travel and tech stocks leading losses.

Oil prices down 6.5 per cent

The price of oil is also down 6.5 per cent, to US$105.05, as concerns about lockdowns in China continue.

China is one of the world’s biggest oil consumers.

Saudi Arabia has also cut prices for buyers in Asia.

“Sentiment in the oil market will be dictated by negotiations with the EU on a proposal to ban Russian oil,” ANZ noted.

“Any sign of unity in enacting sanctions before the end of the year should see oil prices react positively.”

Meanwhile, the Australian currency was under 70 US cents.

“With a high correlation to global equities currently, pressure on the AUD is likely to persist,” ANZ added.

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