Tech rout slams ASX on biggest 1-day fall since Sept 2020, closing 2.7% lower

Australian shares slumped, erasing all of Tuesday’s blockbuster gains, its biggest one-day decline since September 2020 on worries of interest rate hikes coming sooner than anticipated. The local bourse tracked losses on Wall St with all sectors in negative territory as tech names take it on the chin.

The hawkish tilt in the meeting minutes triggered a sell-off in treasury bonds, a weak spot for tech names as they readjust for the Fed opening the door to trimming the balance sheet after rate hikes kick-off.

Omicron angst weighed on investor’s minds after the nation notched 68,000 new record Covid-19 cases while Hong Kong banned flights from Australia, and seven other countries after reimposing strict virus control measures.

Market participants priced in an aggressive timeline adjusting to the officials unanimously agreeing to an earlier rate hike, a contrast from September when policymakers were evenly divided, waiting for full employment before a rate hike would be considered. The change in colour comes at a time when the economy is seeing persistent and hot inflation amid supply chain disruptions.

Buy now, pay later darling Afterpay (ASX:APT) sunk 10.8 per cent to $71.85, its lowest level since August 2020, tracking performance from soon to be parent US payments giant Block, which is slated to complete its acquisition this month.

Zip Co (ASX:Z1P) dived 6.1 per cent to $3.85, Xero (ASX:XRO) fell 6.5 per cent to $131.50, while other tech players fell in the order of five to seven per cent.

Financials fell with Commonwealth Bank (ASX:CBA) led the declines falling 3.3 per cent, Macquarie Bank (ASX:MQG) lost 3 per cent, National Australia Bank (ASX:NAB) down 2.2 per cent, Westpac (ASX:WBC) dipped 1.7 per cent while ANZ (ASX:ANZ) closed 1.4 per cent lower.

However, there were some bright spots in the sea of red with iron ore miners closing mixed after Rio Tinto (ASX:RIO) rose 0.7 per cent, BHP (ASX:BHP) added 0.1 per cent while Fortescue Metals (ASX:FMG) bucked the trend to close over 1 per cent lower.

Vulcan Steel (ASX:VSL) rallied 6.5 per cent to $10.30 while Latitude (ASX:LFS) closed 1.8 per cent higher at $2 after the digital payments giant unveiled its plans to buy the BNPL arm of Humm for $335 million.

Energy stocks snapped its winning streak with steep falls by Santos (ASX:STO) closing 2.7 per cent lower while Woodside Petroleum (ASX:WPL) closed 2.5 per cent lower.

Investors are watching Asian markets ripple lower while preparing for Wall St to open weaker as US futures are pointing to a fall.

The moves come ahead of the next jobs report on Friday, a backward view of the labour market before Omicron hit the decks as traders ponder on the flow on effect of the Fed’s move and the tone of 2023, when changes are slated to take effect in the economy.

At the closing bell, the S&P/ASX 200 was 2.7 per cent or 208 points lower at 7,358.

Local economic news

ISM Markit services purchasing managers business activity Index fell to 55.1 in December from 55.7 in November, seasonally adjusted signally growth at a slower pace.

Company news

Digital payments giant Latitude (ASX:LFS) unveiled its plans to buy the consumer finance division of Humm for $335 million. The proposed transaction “will cement Latitude’s position as the leading instalments and consumer lending business in Australia and New Zealand”. Shares closed 1.8 per cent higher at $2.

In other M&A news, Life360 (ASX:360) has completed its $283 million takeover of bluetooth-tracking device company Tile. Shares closed 8 per cent lower at $8.39.

Poker machines giant Aristocrat Leisure (ASX:ALL) has hit a roadblock in its $3.9 billion bid for Playtech as the British gambling software company continues talks with a rival bidder. Shares closed 4.5 per cent lower at $43.25.

Meanwhile, a Nickel Mines (ASX:NIC) project in Indonesia has received corporate tax relief from the Jakarta government. The tax concessions include waiving income tax for a decade, followed by a 50 per cent discount for the following two years. Shares closed 1.4 per cent lower at $1.415.

Insurer IAG (ASX:IAG) has maintained its $10 billion catastrophe reinsurance protection cover, the same level as 2021. Shares closed 0.6 per cent lower at $4.36.

Futures

The Dow Jones futures are pointing to a fall of 121 points.
The S&P 500 futures are pointing to a fall of 24 points.
The Nasdaq futures are pointing to a fall of 128 points.
The SPI futures are pointing to a fall of 208 points when the market next opens.

Best and worst performers

All sectors closed in the red with the sector that notched the fewest losses was materials, down 1.5 per cent. The worst-performing sector was information technology tumbling 6.4 per cent.

The best-performing stock in the S&P/ASX 200 was Paladin Energy (ASX:PDN) closing 1.6 per cent higher at $0.94, followed by shares in Rio Tinto (ASX:RIO), and OZ Minerals (ASX:OZL).

The worst-performing stock in the S&P/ASX 200 was Pinnacle Investment (ASX:PNI) closing 13.1 per cent lower at $13.68, followed by shares in Afterpay (ASX:APT), and Life360 Inc. (ASX:360).

Asian markets

Japan’s Nikkei has lost 2.7 per cent.
Hong Kong’s Hang Seng has lost 0.4 per cent.
China’s Shanghai Composite has lost 0.2 per cent.

Commodities and the dollar

Gold is trading at US$1805.46 an ounce.
Iron ore is 0.4 per cent higher at US$120.40 a ton.
Iron ore futures are pointing to a rise of 3.1 per cent.
Light crude is trading $1.06 lower at US$76.79 a barrel.
One Australian dollar is buying 71.72 US cents.