ASX 200 plunges more than 5% as global stock markets crash


Australian stocks plunge deep into the red today as global markets crash and fears grow over a global recession.

Australian stocks plunge deep into the red today as global markets crash and fears grow over a global recession.

The top 200 companies on the Australian stock market plunged just over 5% this morning, much worse than the expected 4% decline.

There were heavy losses across all 11 sectors of the equity market and only two stocks across the benchmark index rose – Uniti and Crown. Even those two stocks rose a fraction of a percent.

The big banks are sticking to it again after the Reserve Bank’s bigger than expected rate hike last week; ANZ fell 5.3% to $21.84, CBA fell 4.6% to $89.46, NAB fell 5.2% to $26.61 and Westpac fell 6.5% at $19.49.

Miners also recorded heavy losses as fresh outbreaks of Covid-19 in China fueled fears of a slowdown in demand for commodities.

BHP fell 6.2% to $43.35, Rio Tinto fell 6.2% to $108.67 and Fortescue plunged 7.7% to $19.81.

Why is the market plunging?

Wall Street hit it hard over the weekend and again overnight, seemingly amid panic that the Federal Reserve will raise interest rates much faster and higher than expected.

The fear is that if interest rates rise too quickly, it will dramatically reduce the public’s ability to spend money on other things, leading to a recession next year.

The Australian stock market meanwhile was closed for three days due to the long weekend and opened in a bloodbath this morning.

This follows an overnight horror on Wall Street due to rising inflation, which soared to 8.6% in the United States and sparked a massive sell-off around the world.

Global equities, oil prices and bitcoin all plunged on heightened recession fears triggered by runaway inflation.

The Dow plunged more than 800 points before regaining ground. Overall, the S&P 500 fell 3.4% as investors feared the Federal Reserve could raise interest rates even faster.

Overall, the top 10 companies in the S&P 500 lost more than $1 trillion in market capitalization in four days, MarketWatch reports.

Big tech companies Apple, Microsoft and Amazon took the biggest hits overnight, but the pain was widespread, with just five of the index’s 504 stocks up. At one point in the day, all stocks in the S&P 500 were in the red at the same time.

The index of America’s largest companies fell 21.3% in the first 112 trading days of 2022, the worst start to a year since 1940.

The Australian technology giant Atlassian went into the red -9.5%, Tesla -7.4% and Apple -3.5%.

All of this means pain for the Australian Stock Exchange.

“The hangover from a higher-than-expected US inflation reading continues to cause scissor pain in markets as it dims hopes that the US Federal Reserve might be able to ease off the rising interest rates,” noted AJ. Bell’s chief investment officer, Russ Mould.

Horror start of the week

US and European stocks had already fallen on Friday after the inflation data, with Asia following suit on Monday.

European stock markets extended their losses ahead of the weekend, while London was also hit by data showing the UK economy contracted in April for a second consecutive month.

Wall Street opened sharply lower, with the blue-chip Dow down about 2% and the tech-heavy Nasdaq down about 3%.

Global oil prices, whose surge contributed massively to soaring inflation, slipped one percent as the high cost of living raises expectations of a recession.

The possibility of more Covid restrictions in China’s biggest cities also weighed on crude futures, as the country is a big consumer of oil.

New coronavirus outbreaks in Shanghai and Beijing have seen authorities reimpose containment measures.

bitcoin crash

Bitcoin fell to an 18-month low below $24,000 as investors shunned risky assets amid the sharp selloff in global markets.

The unit was also hit hard by news that cryptocurrency lending platform Celsius Network has suspended withdrawals, citing volatile conditions.

“It is not very surprising to see such a strong downturn as we have noticed an increased correlation over the past few years between traditional stocks, which have also fallen recently, and the cryptocurrency market,” Walid Koudmani noted. , chief market analyst at XTB.

Patrick O’Hare, an analyst at Briefing.com, said the carnage in the crypto market is “raising concerns about growth prospects due to the reduced wealth effect which also incorporates falling stock prices and obligations”.

Recession fears

Investors were surprised on Friday when data showed US inflation jumped to 8.6% in May, the fastest pace in more than 40 years, as war in Ukraine still fueled oil prices. energy and food.

The reading led to fervent speculation that the Fed will now consider a single 75 basis point interest rate hike at its meeting this week.

With the central bank forced to be more aggressive, there are growing fears that the US economy could be sent into recession next year.

“The market now thinks a lot more about the Fed pushing rates up sharply to get inflation under control and then cutting back as growth falls,” said Stephen Innes of SPI Asset Management.

The US dollar, however, appreciated against its major rivals, benefiting from its safe haven status and expectations of an aggressive interest rate hike from the Federal Reserve.

The US currency hit a 24-year high against the yen before falling back as it broke through 78 Indian rupees for the first time. It jumped one percent against the pound.

— with AFP

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