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The share market logged its biggest weekly loss of the year as rate hikes on both sides of the Pacific sharpened fears of economic slowdown.

The S&P/ASX 200 skidded 159 points or 2.16 per cent this session to its lowest close since mid-March. The loss followed a heavy sell-off on Wall Street as investors reassessed the outlook for equities following Wednesday’s US rate hike.

For the week, the Australian benchmark lost 229 points or almost 3.1 per cent. The market declined on four out of five sessions during a week when the Reserve Bank raised its key rate for the first time since 2010.

What moved the market

Speculation earlier this week that higher interest rates were “baked in” to current equity valuations was exposed as fanciful during a sobering night on Wall Street. The Dow plunged more than a thousand points during its worst session since October 2020. The Nasdaq Composite plunged almost 5 per cent.

“As the central bank recently embraced its sharpest rise in interest rates in more than 20 years, investors are now fearing one of the most aggressive tightening of the monetary policies in the days ahead,” Kunal Sawhney, chief executive of research group Kalkine, said.

“Investors seem to be majorly worried about the impact of monetary policy tightening on consumer demand and the broader economy. At the same time, the hawkish stance from the central bank has sparked discussions around the possibility of a US recession.”

While the rates and inflation trajectories in Australia will be shallower than in the US, that will not protect the economy from a global slowdown. The Reserve Bank found itself raising rates this week while China, the nation’s biggest export customer, battles a Covid outbreak and the economic fallout from lockdowns. Commodity markets have held up well so far, but for how long?

The RBA said today it expects inflation to hit 6 per cent by the end of the year. The bank anticipates its preferred measure, core inflation, will overshoot its 2 – 3 per cent target range by reaching 4.75 per cent by December. That means more rate rises.

“The Board is committed to doing what is necessary to ensure that inflation in Australia returns to target over time. This will require a further lift in interest rates over the period ahead,” the bank said in today’s quarterly statement on monetary policy.

Winners’ circle

Just 12 of the benchmark’s  200 component companies finished ahead. Of those, only three gained more than 1 per cent.

News that directors were buying shares on-market helped Polynovo top the list. The medical device developer rose 4.05 per cent.

Healthcare company Fisher & Paykel firmed 2.27 per cent. Supermarket Coles gained 1.03 per cent.

The only other companies to record gains – all less than 1 per cent – were Medibank Private, Amcor, Cromwell Property, Costa Group, Mineral Resources, Wesfarmers, ResMed, Janus Henderson and Woolworths.

The speculative end of the market found something to cheer in Hydrocarbon Dynamic. The chemical treatment business provided much of the day’s excitement, reversing off an early low of 2.4 cents to end the session 28.57 per cent ahead at 3.6 cents.

Machine learning firm BrainChip climbed 3.41 per cent to a two-month high. Biotech Avecho gained 15.79 per cent on thin volume. The recently-listed Top End Energy tacked on 13.21 per cent.

Doghouse

A cautious outlook overshadowed a 56 per cent jump in full-year profit at Macquarie Group. The financial powerhouse booked a net profit of $4.706 billion. Assets under management increased by 37 per cent.

The share price slumped 7.78 per cent after Managing Director and Chief Executive Officer, Shemara Wikramanayake, said the group maintained a “cautious stance, with a conservative approach to capital, funding and liquidity”. Wikramanayake warned the short-term outlook was subject to significant market volatility, inflation, interest rates and geopolitical events.

Other significant heavyweight declines included James Hardie down 5.07 per cent, Goodman Group down 4.72 per cent and CSL down 2.93 per cent. Rio Tinto shed 2.08 per cent, NAB 1.95 per cent and Newcrest 1.71 per cent.

News Corp dived 7.77 per cent to a 15-month low as a decline in Foxtel subscriptions took some of the shine off a record third quarter. Revenues increased 7 per cent from the prior corresponding period to US$2.49 billion. Revenues from streaming subscribers increased 32 per cent. Residential subscription services declined 2 per cent.

REA Group dropped 8.07 per cent on news residential listings declined 8 per cent last month year on year. The online property ad group expects national listings to fall this quarter.

Aside from companies reporting, the index’s worst performers were a mix of rate-sensitive growth stocks and miners. Uranium miner Paladin Energy fell 10.3 per cent, app-maker Life360 lost 9.56 per cent and accounting software specialist Xero 9.07 per cent.

The biggest float of the year was a massive anti-climax on one of the toughest trading days in recent memory. Disruptive mining analysis firm Chrysos Corporation slumped 36.15 per cent.

Other markets

Hong Kong’s Hang Seng took the biggest hit among Asian markets, falling 3.61 per cent. China’s Shanghai Composite lost 1.77 per cent. The Asia Dow dropped 1.23 per cent. Japan’s Nikkei firmed 0.55 per cent.

US futures ticked lower. S&P 500 futures dropped four points or 0.1 per cent.

This week’s bull run in oil continued. Brent crude climbed 42 US cents or 0.38 per cent to US$111.34 a barrel.

Gold fell US$1.10 or 0.06 per cent to US$1,871.74.60 an ounce.

The dollar dived almost 2 per cent overnight and continued to lose altitude this afternoon. The Aussie was lately down another 0.35 per cent at 70.94 US cents.

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