Finance: ASX skids on fears interest rates will remain higher for longer

The share market lost ground on Wednesday as investors pared back expectations that central banks would cut rates as aggressively as previously anticipated.

At the end of trading, the S&P/ASX200 fell 1.4 per cent, or 104.6 points, to reach 7,532.2.

On Monday, the index was within five points of reaching a record intraday high.

All 11 industry sectors finished in the red, led by falls in interest rate sensitive tech and real estate sectors which sank 3 per cent and 2.4 per cent, respectively.

The All Ordinaries also fell 1.4 per cent, reaching 7,757.3 at the closing bell.,

The Australian dollar was steady at US67.62c after dipping 0.8 per cent on Tuesday as the US dollar jumped on expectations the US Federal Reserve will not move to ease interest rates as quickly.

Zoran Krescovic, market analyst at EightCap, said after equities had enjoyed a bullish run over November and December, a fall was unsurprising.

“When we reach these critical levels there is always a bit of short selling, of profit taking, coming into the market,” Mr Krescovic said.

In Australia, bond markets had pared back the number of rate reductions priced in for 2024, Mr Krescovic said, after “getting ahead of itself” and implying a full three rate cuts up until last week.

“We’re seeing an interest rate cut priced in for the month of June, followed by another cut in November,” he said.

Oil prices were flat as traders shrugged off a re-escalation of hostels in the Red Sea, with the global benchmark, Brent Crude, steady at $US75.84 per barrel.

A fresh poll of economists and analysts released by Reuters on Friday showed international oil prices were likely to stay around $US80 a barrel this year as flaring geopolitical tensions, which would add to prices, were dragged lower by souring global demand.

Despite steadying in oil prices, the energy sector sank 1.1 per cent. Ampol skidded 1.1 per cent to $36.22, Woodside dropped 1 per cent to $31.15 and Santos slid 1.6 per cent to $7.56.

Iron ore miners were also hit even as prices for the commodity on the Singapore exchange soared to $US142 per tonne, up 0.2 per cent, on the February contract.

BHP slumped 1.5 per cent to $49.77, Rio Tinto fell 1.4 per cent to $134.72, and Fortescue dropped 1.9 per cent to 428.84.

Elsewhere in commodities lithium and gold shares took a beating. Gold miner Gold Road Resources sank 9 per cent to $1.78 while lithium small cap, Sayona Mining, tumbled 5.7 per cent to 6.6c.

In its first session for 2024, Wall Street was mixed. Interest-rate sensitive stocks fell, with the tech-heavy Nasdaq shedding 1.6 per cent – its worst day since October. The S&P500 sank 0.6 per cent, while the Dow Jones added 0.1 per cent.

US 10-year Treasury yields spiked nearly 9 basis points to 3.9 per cent, while the 2-year Treasury yield was 8 basis points higher at 4.3 per cent.

In company news, Dan Murphy’s owner Endeavour Group rallied 2.5 per cent to $5.37 after it announced it was replacing chair Peter Hearl with former Murray Goulburn boss Ari Mervis. Amid sharp falls in its share price, the board shakeup is the result of a public spat between the business and its largest shareholder, pub baron Bruce Mathieson.

Insurance giant Suncorp added 0.5 per cent to $13.80 after it indicated weather related claims in the first half of FY2024 were expected to fall.

Fintech company Block was one of the worst performers on the share market, tumbling 6.7 per cent to $106.11. The Afterpay and Square parent reported operating losses for the quarter, missing analyst’s expectations.

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