Markets wrap: ASX softens as investors factor in more rate hikes

The negative market momentum triggered by Tuesday’s RBA statement carried into a new session for ASX investors, with the local stock market having its worst day in three weeks.

The Australian sharemarket softened on Wednesday as the prospect of steeper-than-expected rate hikes both home and abroad sent equity investors heading for the stands.

Technology and mining stocks were particularly weak as the benchmark ASX 200 recorded its worst session in three weeks, dropping 37.8 points or 0.5 per cent to close at 7490.1.

The index fell by as much as 1.2 per cent in the first hour of trade, but the major banks and supermarket Woolworths helped cushion the blow and gradually reduce the damage.

The broader All Ordinaries ended 44.9 points, or 0.6 per cent lower at 7788.3, ​​while the Aussie dollar eased back from a 10-month high to 75.72 US cents at the local close.

The negative market momentum that began with Tuesday’s RBA statement not only carried into a new session, but was exacerbated by similarly hawkish commentary on interest rates out of the US.

US Fed Governor Lael Brainard – a usually reliable dove – sent traders scrambling overnight when she suggested a reduction of the Federal Reserve’s balance sheet could begin as early as next month, and at a much faster pace than previous efforts.

The prospect of tighter monetary policy sent bond yields soaring and the tech-heavy Nasdaq plunging as investors pivoted away from growth names.

A similar pattern repeated in Australian equities, with a swath of tech and payment firms copping a beating.

Afterpay owner Block Inc fell 6.9 per cent to $178.27, while buy now, pay later rival Zip Co was 4.2 per cent lower at $1.48, and Sezzle fell 1.8 per cent to $1.34.

Accounting software firm Xero lost 2.9 per cent to $104.88, Wisetech Global dropped 1 per cent to $52.70, Appen was 2.7 per cent down at $6.83 and Altium shed 2 per cent to $34.69.

OANDA Asia-Pacific senior analyst Jeffrey Halley said a massive drop in China’s Caixin Non-Manufacturing PMI proved to be another weight on regional markets, as were continued concerns around the Shanghai Covid-19 lockdown.

“Against the backdrop of harsher sanctions on Russia and yield curve inversion, it was enough to see investors have second thoughts and move to the sidelines,” Mr Halley said.

Further consolidation in the oil price knocked energy names such as Woodside Petroleum, Santos and Origin Energy lower, while the mining giants also fell even as iron ore continued to hover at $US160 a tonne.

BHP lost 1 per cent to $51.41, Rio Tinto shed 1.2 per cent to $118.85, Fortescue Metals dropped 0.3 per cent to $21.66 and Champion Iron fell 2.5 per cent to $7.81.

Mineral Resources added another 1.1 per cent to close at $60.35, but there wasn’t much joy across the remaining lithium names.

Pilbara Minerals fell 5.6 per cent to $3.35, Vulcan Energy was 0.8 per cent lower at $10.90, Liontown Resources dropped 5.8 per cent to $1.875, Allkem was 2.8 per cent worst off at $13.04, Core Lithium fell 6.1 per cent to $1.38 and Novonix shed 6.9 per cent to $6.76.

Lynas Rare Earths was another significant loser with a 6 per cent drop to $10.01 and gold miners Newcrest, Northern Star Evolution and St Barbara also ended lower as the precious metal softened.

Coal miners, however, managed to gain ground after the European Union proposed banning imports from Russia

Whitehaven rose 5.5 per cent to $4.39, New Hope Coal was up 6.9 per cent to $3.71 and Yancoal gained 4.8 per cent to $4.82 on the prospect of higher prices and higher demand.

Commonwealth Bank was the strongest of the major lenders, jumping 1.3 per cent to $105.71 to offset some of the damage done by the materials and tech decline.

Westpac rose 0.8 per cent to $24.24, National Australia Bank was 1.2 per cent ahead at $32.56 and ANZ gained 1.2 per cent to $27.36, but Macquarie Group fell 0.9 per cent to $205.14.

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