$25 billion loss as war, inflation, rate hikes hit markets: Aus shares close 1.8 per cent lower

The Australian share market suffered a $25 billion loss as “war, inflation, rate hikes” hit global markets.

The S&P/ASX 200 fell 1.8 per cent to 6,941 points on Thursday, the lowest closing level since late January and the first time the blue-chip benchmark has closed below the 7000 point threshold since early March.

Australian technology stocks suffered their worst single-day losses since early in the pandemic. The tech sector declined by 8.7 per cent. It was the worst day for ASX tech stocks since 18 March  2020. The declines followed growing unease among investors about the path ahead for interest rates in the US after fresh inflation data came in higher than expected, increasing the likelihood the Federal Reserve will have to act stridently to calm rising consumer prices.

The losers on the ASX 200 included Altium (ASX:ALU), down 16.7 per cent, Life360 (ASX:360), down 12 per cent, Xero (ASX:XRO), down 11.6 per cent and Telix Pharmaceuticals (ASX:TLX), down 11 per cent. 

Shares in Block fell 17.6 per cent, worse than any other blue chip, mirroring a decline for the company’s US-listed shares on Wednesday.

Magellan shares dropped 7.9 per cent to a two-week low of $14.72 as US growth stocks underperformed amid a further retreat in the global share market. It comes as above-consensus US CPI risks more aggressive Fed rate hikes, threatening Magellan’s investment performance, funds under management and earnings.

Xero shares fell heavily to a 52-week low, despite the company reporting a 29 per cent increase in operating revenue to NZ$1.1 billion. The fall was exaggerated by tech selling pressure across the board globally and disappointment with subscription growth numbers, revenue and earnings.

The banking sector was mixed with Westpac down 1.90 per cent, ANZ down 0.9 per cent, versus gains for NAB (up 0.95 per cent) and CBA (up 0.6 per cent, following its third quarter profit update released pre-market). Suncorp Group (ASX:SUN) rose 1.13 per cent with NAB expressing interest in their banking division, potentially leaving SUN positioned as a pure play insurer in the future.

Companies to avoid the sell-off included Orica (ASX:ORI), which said before markets opened that it had increased revenues by a quarter in the half-year to the end of March. The company’s shares rose 4.7 per cent.

Soaring margins fuelled Ampol (ASX:ALD) and Viva Energy (ASX:VEA) shares to multi-year highs, capping a remarkable turnaruond for companies that appeared to be on the brink just a year ago. Viva said earnings from the first quarter of 2022 totalled $308 million, an increase of 65 per cent from the same period one year earlier, driven in large part by the margins it enjoys from processing crude oil, which totalled US$26.40 (AU$38.16) a barrel in April, well ahead of the US$11.50 (AU$16.60) a barrel reported for March and the average of US$8.30 (AU$12) a barrel reported for the March 2022 quarter.

Australia’s first cryptocurrency exchange traded funds were met with lukewarm reception from investors on their historic debut on Thursday as the underlying price of bitcoin fell to a six-month low.

The Cosmos Purpose Bitcoin Access ETF and ETFS 21Shares Bitcoin ETF each experienced trading volumes of about $250,000 in the first hour of trade on Thursday, while the ETFS 21Shares Ethereum ETF experienced volumes of about $150,000. Market sources described the first half of the day’s trade as “somewhat muted” and a “fizzer”, with many indicating the early fund flows were below expectations.

The Australian dollar declined further, hitting a fresh 22-month low, making it the second-worst performing G10 currency behind the NZD/USD. The Aussie was buying 68.83 US cents, down from 69.71 US cents at Wednesday’s close.

The US interest rate implications of above-consensus US CPI prompt are causing renewed risk aversion and volatility in global markets, including a renewed sell-off in commodities, and AUD/USD tends to be one of the best ways to play those themes.

Futures

The Dow Jones futures are pointing to a fall of 144 points.
The S&P 500 futures are pointing to a fall of 18 points.
The Nasdaq futures are pointing to a fall of 58 points.
The SPI futures are pointing to a fall of 130 points when the market next opens.

Best and worst performers

All sectors closed in the red. The sector with the fewest losses was Utilities, down 0.6 per cent. The worst-performing sector was Information Technology, down 8.7 per cent.

The best-performing stock in the S&P/ASX 200 was Orica (ASX:ORI), closing 4.7 per cent higher at $16.40. It was followed by shares in AGL Energy (ASX:AGL) and Ampol (ASX:ALD).

The worst-performing stock in the S&P/ASX 200 was Block (ASX:SQ2), closing 17.6 per cent lower at $99.90. It was followed by shares in Altium (ASX:ALU) and Life360 (ASX:360).

Asian markets

Japan’s Nikkei has lost 1.8 per cent.
Hong Kong’s Hang Seng has lost 2.3 per cent.
China’s Shanghai Composite has lost 0.5 per cent.

Commodities and the dollar

Gold is trading at US$1848.55 an ounce.
Iron ore is 4.2 per cent higher at US$133.50 a ton.
Iron ore futures are pointing to a fall of 0.8 per cent.
Light crude is trading $1.67 lower at US$93.73 a barrel.
One Australian dollar is buying 68.82 US cents.