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The share market’s losing run extended to a fourth session and a fresh 16-month closing low amid risk aversion ahead of tonight’s US interest rate decision.

The S&P/ASX 200 finished near its lowest point of the day, down 85 points or 1.27 per cent.

A mid-session rebound faded as losses among the major banks deepened and BHP turned negative. Tech, property and energy stocks were the biggest drags.

What moved the market

The market continued to haemorrhage pandemic-era gains amid a collapse in consumer confidence and an on-going rotation out of risk assets. Bond yields surged after the Reserve Bank warned inflation could near 7 per cent this year. The Fair Work Commission raised the minimum wage today – a win for low-paid workers but a complicating factor for the RBA’s bid to temper consumption.

Westpac’s monthly survey showed consumer confidence fell to levels normally seen at times of economic recession. The confidence index declined 4.5 per cent this month to 86.4. Just 7.9 per cent of respondents said the share market was the ‘wisest place for savings’.

“Over the 46-year history of the survey, we have only seen Index reads at or below this level during major economic dislocations. The record lows have been during COVID-19 (75.6); the Global Financial Crisis (79.0); early 1990s recession (64.6); the mid-1980s slowdown (78.7) and the early 1980s recession (75.5),” Westpac chief economist Bill Evans wrote.

“Those last three episodes were associated with high inflation; rising interest rates; and a contracting economy – a mix that may be threatening to repeat.”

The rival weekly ANZ-Roy Morgan confidence index slumped 7.6 per cent to 80.4, its weakest reading since April 2020. Just ten per cent of survey respondents expected “good times” for the economy – a record low.

RBA Governor Philip Lowe warned Australians to prepare for much higher rates as inflation nears 7 per cent by year-end. Lowe said the bank will “do what’s necessary” to bring inflation back within the bank’s 2-3 per cent target range.

“It’s unclear at the moment how far interest rates will need to go up to get that,” he added.

The ASX 200 has fallen more than 600 points since the RBA surprised the market by raising the cash rate target by 50 basis points last Tuesday.

“Investors typically become less willing to pay a higher price for risky assets when interest rates go up,” Kalkine Group CEO Kunal Sawhney said.

“The cash rate is now expected to reach 4.2 per cent by May next year, which is much sooner than Monday’s levels when the implied highest rate was 3.8 per cent and was not expected before early 2024,” he added 

“Given the expectation of such a rapid pace of rate hike, Investors trying to pick the bottom need to be extra careful as the RBA’s tightening cycle is likely to be highly unpredictable. With interest rates pointing to economic slowdowns (if not recessions), it is highly likely that corporate earnings could take a hit, creating a downward pressure on share prices. So, the market may see more downside going forward.”

US stocks finished mixed overnight in see-saw trade ahead of tonight’s Federal Reserve interest rate decision. The S&P 500 sank 0.38 per cent to a fifth straight loss, the index’s worst run since January. The Dow shed 0.5 per cent. The Nasdaq bounced 0.18 per cent.

Winners’ circle

Select defensive assets attracted a bid, but investors were increasingly selective as the market mood deteriorated in afternoon trade.

Agribusinesses GrainCorp and Elders put on 3 and 1.93 per cent, respectively. IGA operator Metcash rose 1.8 per cent, drinks retailer Endeavour 1.54 per cent, poultry farmer Inghams 1.12 per cent and wine maker Treasury 0.65 per cent.

Insurers outperformed during a mixed session for financials. IAG gained 3.12 per cent, Suncorp 3.53 per cent and QBE 2.17 per cent. Among the majors, Macquarie Group firmed 0.46 per cent. NAB dropped 1.9 per cent, CBA 0.64 per cent, ANZ 1.82 per cent and Westpac 1.84 per cent.

Other market-movers to advance included Telstra +2.13 per cent, Fortescue Metals +1.27 per cent and Newcrest +0.13 per cent.

Lithium Plus Minerals jumped 28.81 per cent after Northern Territory authorities signed off on a management plan for the firm’s flagship project. Drilling will commence early next month.

Chase Mining climbed 21.43 per cent after acquiring a graphite project in Halls Creek, WA. The miner said the McIntosh project was the third-largest graphite project listed on the ASX.

Doghouse

Companies that generate much of their income in the US were under pressure for a second day. Fiber cement manufacturer James Hardie fell 6.68 per cent to its lowest level since September 2020. CSL shed 1.2 per cent, Cochlear 3.94 per cent and PointsBet 1.94 per cent.

A torrid week for the out-of-favour BNPL sub-sector continued. Sezzle shed 13.51 per cent. Splitit dropped 5.8 per cent. Afterpay parent Block declined 7.08 per cent to a fresh ASX low. Zip Co shed 5.66 per cent.

ResMed dropped 2.49 per cent after announcing it will acquire privately-owned German software firm Medifox Dan for US$1 billion. The Australian medical device manufacturer said the German firm’s customer base was complementary to ResMed’s US software-as-a-service business.  

Last night’s tepid bounce on the Nasdaq failed to encourage tech investors. Novonix sagged 13.64 per cent, Megaport 11.07 per cent and Appen 5.56 per cent.

Energy stocks were also weak. Paladin Energy gave up 7.35 per cent, Woodside 3.09 per cent and Santos 0.99 per cent.

Other markets

Chinese stocks rose after factory output unexpectedly expanded last month and unemployment fell. The Shanghai Composite rallied 1.89 per cent. Hong Kong’s Hang Seng jumped 1.6 per cent. The Asia Dow dipped 0.28 per cent. Japan’s Nikkei retreated 1.01 per cent.

S&P 500 futures bounced 16 points or 0.43 per cent.

Oil recouped almost half of last night’s loss. Brent crude climbed 50 US cents or 0.4 per cent to US$121.67 a barrel.

Gold firmed US$5.90 or 0.3 per cent to US$1,819.40 an ounce.

The Chinese data surprise helped the dollar bounce 0.27 per cent to 69.06 US cents.

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