ASX slides lower as Wall Street slumps

Energy companies (down 1.3 per cent) were also weaker with Woodside shedding 1.4 per cent and Santos declining 1.6 per cent. Coal miners New Hope (down 0.8 per cent), Whitehaven (down 0.9 per cent) and Yancoal (down 1 per cent) also dropped.

Washington H Soul Pattinson (down 5.3 per cent) was the biggest large-cap decliner. Two of the big four banks also traded lower, with CBA losing 0.5 per cent and NAB shedding 0.3 per cent.

The lowdown

TMS Capital portfolio manager Ben Clark said the Australian sharemarket dropped on Monday as bond yields increased.

“There was a pretty solid sell-off in markets,” he said. “Long-dated bond yields are retesting highs we saw last year, with growth stocks and interest-rate sensitive companies under pressure again.”

While sectors such as information technology suffered, companies that tend to benefit from high bond yields, such as resources companies, were relatively stronger, Clark said.

On Thursday AEST, the Federal Reserve will make its next interest rate decision, which Clark said markets were generally acting a bit nervous about. “There’s a growing view that inflation is proving stickier than before, rates might stay higher for longer and there may be another rate rise or two depending on the country.”

Elsewhere, Wall Street capped a choppy week of trading with a broad slide for stocks on Friday, giving the S&P 500 its second losing week in a row.

The benchmark index fell 1.2 per cent, its first loss in three days. The Dow Jones dropped 0.8 per cent and the Nasdaq composite gave back 1.6 per cent.

US automaker stocks proved resilient after members of the United Auto Workers union walked off the job at several plants. Ford slipped 0.1 per cent and General Motors rose 0.9 per cent. Shares in Stellantis gained 1.9 per cent in trading on the Milan Stock Exchange in Italy.

The market posted some gains earlier this week following several healthy indicators on the economy. Wall Street has been watching economic updates ahead of the Federal Reserve’s interest rate policy meeting next week. The central bank is expected to hold interest rates steady after spending much of the past two years pushing rates higher in its bid to tame inflation.

Boosting market sentiment this week was a report on Thursday that said US shoppers spent more at retailers last month than economists expected. A separate report on Thursday said fewer workers applied for unemployment benefits last week than expected.

A third report on Thursday said prices getting paid at the wholesale level rose more last month than economists expected. That could be a discouraging signal for households if the higher-than-expected inflation gets passed on to shoppers at the consumer level.

Meanwhile, a closely watched survey from the University of Michigan showed consumer sentiment slipped a bit in September. The latest reading, though, shows that overall sentiment remains strong. It also said consumers lowered their expectations for inflation in the year ahead to 3.1 per cent, the lowest reading since March 2021.

“Things were fairly in line from a data perspective,” said Matthew Stucky, senior portfolio manager at Northwestern Mutual Wealth Management. “Really, the market is laser-focused on what’s going to impact Federal Reserve activity.”

The central bank raised rates aggressively through 2022 and 2023 in an effort to tame inflation, but it maintained interest rate levels at its last meeting. Inflation has generally been easing back to the central bank’s target of 2 per cent.

“A lot of the optimism about the Fed pausing is priced into markets,” Stucky said.

Inflation at the consumer level edged higher than expected in August, but high petrol prices were the biggest driver. Oil prices have been climbing over the summer after Saudi Arabia decided to maintain production cuts. That raised concerns about gasoline prices rising and stoking inflation.

Investors overwhelmingly are betting that the Fed will hold interest rates steady when it closes a two-day meeting on Wednesday. They also expect the central bank could hold rates steady for the rest of the year. The Fed has said it remains willing to continue raising rates if it seems necessary to continue fighting inflation.

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With AP

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