ASX plunges after recession fears rattle Wall Street
Fears of recession in the world’s largest economy have rattled investors, who wiped more than $80 billion off the local sharemarket, sparking the worst two-day sell-off since the COVID-19 pandemic four years ago.
Panic set across the globe after the United States Bureau of Labour Statistics last week released economic data, which heightened fears the employment market was worse than expected, and the central bank had kept interest rates too high for too long.
The ASX plunged on Monday morning. Credit: Louie Douvis
The S&P/ASX 200 plunged 3.7 per cent on Monday, the worst daily fall since May 2020, after a “bloodbath” on Friday that shot the bourse down 2.1 per cent.
The index has lost more than $130 billion in the past two trading sessions, tracking the losses on Wall Street where the S&P500 sank 1.8 per cent on Friday, the Dow Jones dropped 1.5 per cent and Nasdaq fell 2.4 per cent. In Japan, the Nikkei tumbled 5 per cent.
US employment data showed 114,000 jobs were created in July, significantly below market expectations for jobs growth of 175,000, while the unemployment rate rose to 4.3 per cent – the highest level since October 2021. Another report out of the US showed manufacturing activity, which is highly vulnerable to rising interest rates, was still shrinking, and its contraction was accelerating.
While spooked investors began selling off stocks on US recession fears, economists and market analysts said the index was correcting itself after reaching record highs recently. The ASX 200 surpassed the 8100 mark as recently as Thursday.
“[Australia’s] economy slowed down, but we’re not in a recession,” said David Bassanese, chief economist at Betashares. “Obviously, we’re going to be worried … The old adage here is that if the US economy sneezes, we catch a cold, so we’re watching closely what’s currently happening in the US.”
All 11 sectors of the ASX retreated on Monday, with tech stocks (down 6.44 per cent) taking the sharpest hit, amid investor fears that bets on big tech valuations are too high and news over the weekend billionaire Warren Buffet slashed his stake in Apple by 50 per cent.
Local tech stock, WiseTech Global crashed 8.81 per cent, suffering the worst drop among large-caps on the bourse, while Xero was down 5.55 per cent and NEXTDC fell 7.39 per cent.
Healthcare (down 1.95 per cent) recorded the smallest drops, largely on the back of Resmed shares rising 2.92 per cent to become the only large-cap stock to advance on Monday.
Financial stocks have been hit hard, with CBA (down 5.18 per cent), Westpac (down 4.59 per cent), NAB (down 4.52 per cent), and ANZ (down 4.46 per cent), all sharply lower.
More to come.
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