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Fears of a global slowdown helped drive the share market to its lowest since January before a partial mid-morning recovery.  

The S&P/ASX 200 dropped more than 2.5 per cent in early action before buyers stepped in. By mid-session the benchmark had trimmed its fall to 103 points or 1.45 per cent.

All 11 sectors declined. The collapse temporarily pushed the index below the psychologically-significant 7,000 technical support level. The benchmark traded as low as 6939.5 before recovering to 7016.

What’s driving the market

A grinding bear market in growth stocks turned broader and uglier over the last few sessions as investors discounted a quick end to China’s Covid lockdowns. The S&P 500 skidded 3.2 per cent overnight to its weakest level since March 2021.

The fall extended the US benchmark’s decline from its peak to 17 per cent. Overnight, the growth stock-heavy Nasdaq Composite tanked 4.29 per cent.

“The bears are in control,” Adam Sarhan, founder and CEO of 50 Park Investments, told CNBC.

“Sentiment has been very bearish for the last few months, if not the last few weeks for sure, and an inability to rally… tells you everything that you need to know about the current state of the market,” he added.

China’s pursuit of zero-Covid threatens to be a brake on global growth at a time when western economies are already losing momentum in the face of higher prices and higher rates. Chinese media reported authorities in Shanghai and Beijing tightened restrictions over the weekend, dashing hopes for a quick recovery.

“The ongoing theme of mounting growth concerns against a backdrop of central bank tightening is continuing to drive market movements,” NAB economist Taylor Nugent said.

Until last Friday, the ASX had outperformed Wall Street as commodity markets benefitted from embargoes on Russia. Some of that support for the commodities-heavy ASX diminished this week as the sell-off in equities began to infect other markets.

“Commodities sank across the board as investors weighed up the darkening economic backdrop against ongoing supply side issues. Energy led the complex lower, while metals were also down sharply,” ANZ senior commodity strategist Daniel Hynes said.

Crude oil suffered its biggest setback since late March. Iron ore skidded 4.7 per cent. Copper, gold and other metals also declined.

Consumer confidence has crumpled as the cost of living increased and the Reserve Bank indicated interest rates will have to rise significantly to curb inflation. The ANZ-Roy Morgan confidence index fell another 0.2 per cent last week to 90.5, well below the 100 level where optimists outnumber pessimists.

Going up

Polynovo bounced 16.13 per cent on signs the board saw value at current prices as its shares traded near three-year lows. Several directors added to holdings in recent sessions, according to notices lodged today. The medical device developer’s shares hit 85 cents last week after trading as high as $4.08 in late 2020.

Takeover target Pendal Group gained 5.88 per cent on news first-half profit improved 8 per cent to $96.7 million. Revenues increased by 31 per cent to $362.6 million.

A green light from regulators lifted Imugene 6.25 per cent. The immuno-oncology firm announced it had approval from the Human Research Ethics Committee for a Phase 2 trial of its immunotherapy candidate.

Clinuvel Pharmaceuticals edged up 3.04 per cent after securing approval to trial its drug for the treatment of vitiligo in the US.

News Corp bounced 4.25 per cent from a 14-month low.

Just one of the elite companies of the ASX 20 resisted the selling. Fiber cement manufacturer James Hardie climbed 1.43 per cent.

Going down

Sector declines ranged from 0.23 per cent for telecommunications up to 2.88 per cent for energy stocks.

Crude’s 5.7 per cent collapse dragged Woodside Petroleum down 3.26 per cent. Santos shed 2.29 per cent and Beach Energy 5.22 per cent.

Gold miner Newcrest skidded 3.92 per cent to an 11-week low. St Barbara shed 5.27 per cent, Ramelius 4.46 per cent and Sandfire 4.59 per cent.

Other miners to feel the heat from last night’s commodities slump included Chalice -7.21 per cent, Paladin Energy -5.86 per cent and OZ Minerals -4.04 per cent. Fortescue Metals shed 2.65 per cent, Rio Tinto 2.72 per cent and BHP 2.45 per cent.

Afterpay shareholders saw their investment trade near its lowest since the takeover by US giant Block. Block’s ASX listing sagged 7.87 per cent.  

AUB Group fell 12.78 per cent after raising $350 million from institutional investors.

Other markets

China’s Shanghai Composite led a recovery on Asian markets, rising 0.88 per cent. The Asia Dow pared its fall to 1.44 per cent. Hong Kong’s Hang Seng was lately down 1.88 per cent and Japan’s Nikkei off 1.17 per cent.

US futures rebounded. S&P 500 futures rallied 18 eight points or 0.45 per cent.

Oil added to last night’s loss. Brent crude declined US$1.23 or 1.15 per cent to US$104.72 a barrel.

Gold bounced US$1.70 or 0.1 per cent to US$1,860.10 an ounce.

The dollar edged up 0.03 per cent to 69.56 US cents.

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