Australian shares have dropped for a third straight trading day, after a technology sell-off on Wall Street intensified in the final hour over fears of a slowing economy and aggressive US interest rate hikes.
The ASX 200 index had fallen 0.7 percent to 7,268 points, by 12:20 pm AEST on Wednesday.
The Australian dollar rose to 71.5 US cents, shortly after the Bureau of Statistics (ABS) confirmed the biggest inflation spike in two decades.
Consumer prices shot up by 2.1 percent in the March quarter.
It also means the cost of living has surged by 5.1 percent in the past year, its biggest jump since June 2001 – around the time the GST was introduced.
There is now an 86 percent chance the Reserve Bank will lift the cash rate target when it next meets on May 3, according to market pricing.
If the RBA proceeds with a pre-election rate hike, this would be the firrst time it has happened since 2007 (when John Howard lost to Kevin Rudd).
Meanwhile, some of the blue-chip companies suffering the heaviest losses on the ASX were Qantas (-3.1pc), A2 Milk (-3.3pc), Graincorp (-2.5pc) and ANZ (-2.1pc).
However, tech-related stocks were the worst performers, including Block (-6.9pc), Zip Co (-5.1pc), Life360 (-7.5pc), Pointsbet (-6.6pc) and Tyro Payments (-6.3pc).
EML Payments plunged 9.9 percent (on top of yesterday’s 38.6 percent slump), following the company’s payment profit downgrade.
Google and YouTube reveal the impact of war
Shares in Google’s parent company, Alphabet, tumbled as the war in Ukraine and inflation concerns led to its advertising revenue falling below Wall Street’s lofty expectations.
In after-hours trade, its stock fell by 2.7 percent (on top of its 3.6 percent slide during the US trading session overnight).
The war in Ukraine had an “outsized impact” on Alphabet’s video streaming service YouTube – because it stopped ad sales in Russia and brand advertisers, (particularly in Europe) scaled back on spending, according to the company’s chief financial officer Ruth Porat.
She also told analysts that 1 percent of Google’s overall sales came from Russia last year.
“Alphabet has been seen as one of the most insulated companies in the advertising space relative to peers, but sometimes you can still own the best house in the worst neighborhood,” said David Wagner, portfolio manager at Aptus Capital Advisors.
YouTube’s advertising sales of $ US6.9 billion missed Wall Street’s target of $ US7.5 billion, according to FactSet.
Alphabet said its March-quarter sales totalled $ US68.01 billion. That was 23 percent higher than last year, but still below the average estimate of $ US68.1 billion among financial analysts tracked by Refinitiv.
It makes Alphabet’s first miss since the December quarter of 2019, before the pandemic.
The company also reported that its costs jumped 23 percent.
Some advertisers are rethinking ad spending amid a higher interest rate environment, higher transport costs and shortages of products from couches to cars to infant formula, analysts said.
Tesla plummets after Musk’s Twitter takeover
Shares in electric car maker Tesla plunged by 12.2 percent, making it one of the worst-performing stocks in New York overnight.
It comes a day after Twitter’s board approved billionaire Elon Musk’s $ 61.4 billion takeover of the social media company, which suggests it may partially reflect investors’ worries about the deal.
There are also concerns that Mr Musk might need to sell some of his stake in Tesla to help pay for his Twitter acquisition.
Previously -priced growth stocks like Tesla have been hammered in recent weeks as investors fret about the impact of higher interest rates on their future earnings.
The US Federal Reserve is expected to lift rates by a half a percentage point (0.5pc) at each of its next two meetings.
‘Indiscriminate selling and fear’
China’s COVID-19-led lockdowns and an aggressive pivot by major central banks to fight inflation have overshadowed what has been a better-than-expected quarterly earnings season so far.
The Nasdaq Composite plummeted by 4 percent, to close at 12,494 points, its lowest level since December 2020.
The tech-heavy index has retreated further into bear market territory, having fallen 22 percent from its November record high.
It was also the Nasdaq’s biggest single-day loss since September 2020.
The S&P 500 lost 2.8 percent to 4,176, while the Dow Jones index fell 2.4 percent to 33,241.
“I think with where the market is right now, in this indiscriminate selling and fear phase, I think you’ve got more potential for downside risk than you have for an upside surprise,” said Ross Mayfield, an investment strategist at Baird in Louisville. , Kentucky.
Oil prices rebounded, following reports that Russian gas supplies to Poland have been halted.
Brent crude rose 3.2 percent to $ US105.54 a barrel, and was also boosted by the People’s Bank of China announcing it would cut the amount of foreign exchange that Chinese banks must hold as reserves.
Spot gold edged up 0.4 percent to $ US1,904.68 an ounce.
Iron ore rebounded 2.4 percent to $ 138.95 a tonne, after heavy losses in recent days.
ABC / Reuters
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