- 01Yields rise; ASX 200 -0.9% to 8741.20.
- 02Brent at $108; oil, rates up globally.
- 03Miners slump: copper, BHP, RIO, FMG down.
- 04Banks modest gains; NAB, ANZ, CBA higher.
Market Wrap: Soaring bond yields, oil and recession fears crunch Australian shares
The Australian share market endured a horror week that crunched the ASX 200 by 2.9% as rising bond yields and spiking oil prices sent recession fears through world markets.
Official interest rates are now tipped to rise in the US, Australia, Japan and elsewhere as the bond market continued to react with dismay to runaway government spending, debt, and the rising price of oil.
The most influential bond in the world – the US ten-year Treasury rate – hit a steep 4.97%, the highest since 2023.
That effectively increases the global cost of capital and sent share market investors scurrying for cover, with President Biden’s exotic promise to send cheques for US$5000 to every American if his Republicans retain power in both houses in the mid-term elections added to the general dismay that huge Budget deficits and government debt were being totally ignored.
Higher rates put governments under pressure.
Higher interest rates will also put governments around the world under stress as they increase the cost of servicing debts.
For the week, Australian shares fell for four sessions in a row to end the week with the ASX 200 falling 78.2 points, or 0.9%, on Friday to 8741.20 points, with seven out of the 11 sectors in the red.
It is now 11% below the record high hit back in February this year.
Brent crude rose to $US108 a barrel on Friday, the highest level in almost four months, as the conflict between Iran and the US worsened and crude oil production was hit by missile attacks on Jordan and Saudi Arabian energy facilities.
Miners feel the pain
Mining companies were hit hard on the ASX, with a rapid 5% fall in copper prices leading to a 4.1% fall in BHP shares (ASX: BHP) to $60.87, a 3.5% fall in Rio Tinto shares (ASX: RIO) to $168.30 and a 3% fall in Fortescue shares (ASX: FMG) to $16.67.
It was an even worse day for copper-only producers with Sandfire Resources shares (ASX: SFR) down 5.4% to $21.26 while Capstone Copper shares (ASX: CSC) fell 8.1% to $14.60.
The continuing falling price of gold also hurt the price of producers with shares in Northern Star Resources (ASX: NST) falling 2% to $22.08 and Evolution Mining shares (ASX: EVN) down 2.4% to $14.
The fear of higher interest rates also sent the prices of technology shares down, with WiseTech Global (ASX: WTC) shares falling 3.8% to $32.69 as it traded ex-dividend, while NextDC (ASX: NXT) shares fell 2% to $12.06 and Appen (ASX: APX) shares fell 3.5% to 97¢.
Banks show a glimmer of hope
There were some slim slivers of hope on the ASX with financials edging higher with National Australia Bank shares (ASX: NAB) up 2.7% to $38.72 after positive broking upgrades.
ANZ shares (ASX: ANZ) also rose 1.7% to $37.27, Westpac shares (ASX: WBC) rose 1.1% to $34.22 and market leader Commonwealth Bank (ASX: CBA) even added 0.7% to $154.19.
A steep drop in funds under management of $US7.2 billion ($10 billion) in August sent shares in GQG Partners (ASX: GQG) down 9.5% to $1.10.
CEO share sales hit companies
Shares in Stockland (ASX: SGP) dropped 3.1% to $4.09 after company CEO Tarun Gupta sold nearly $3.8 million of shares in the property developer.
It was a similar story for shares in Alkane Resources (ASX: ALK) which fell 1.6% to $1.86 when news broke that chief executive Nic Earner had sold $3.89 million worth of shares in the gold and antimony producer.
The week ahead
With such a concentration on rising global bond yields, the focus in the coming week will be firmly fixed on central banks which are once again centre-stage as they prepare to raise interest rates even as recessionary clouds darken on the horizon.
On Wednesday, the US Federal Reserve is widely expected to raise rates by 25 basis points to 3.75-4.0%, which would mark its first rate increase since July 2023.
Even with President Trump’s handpicked chair Jerome Powell in charge, the inflationary pressures arising from the Middle East conflict will be very hard for the Fed to ignore.
Japan set to raise rates
Also tipped to raise rates on Friday is the Bank of Japan, which is expected to add 25 basis points to lift official rates to 1.25% in the wake of rising inflation there.
Here in Australia, Reserve Bank Governor Michele Bullock will face questions from a Federal Parliamentary committee on Friday, which may provide some clues about the RBA board meeting to decide on interest rates on September 28 and 29.
Markets have priced in a 75% chance of a rate hike.
Once again, the Australian share market will face pressure in the coming week as many more companies start to trade without their dividends and the global situation remains very volatile.
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The ASX small-cap stories that matter, filed before 9am AEST. Curated by the Small Caps desk.