(AUSTRALIA) – The Australian share market, benchmarked by the S&P/ASX 200, experienced a significant drop to its lowest point in 10 weeks, closing at 7065.2 points, marking a 1.4 percent decrease.
The broader All Ords index also fell by 1.3 percent. This decline was part of a global trend influenced by Wall Street’s pessimistic response to the US Federal Reserve’s indication of prolonged higher interest rates.
All 11 sectors of the ASX registered losses, with the energy and financial sectors being the hardest hit. Rising bond yields, following the US Federal Reserve’s hints at further interest rate hikes to combat inflation, contributed to the market’s downturn.
Central bank holds interest rates steady
The central bank maintained its benchmark interest rate within the range of 5.25 percent to 5.50 percent, with a projected rate increase by year-end and a suggestion of more stringent monetary policy throughout 2024.
Australian bond markets responded by anticipating higher borrowing costs, with cash rates expected to reach 4.35 percent by March next year.
The possibility of an additional rate increase was also considered. The Reserve Bank of Australia’s policy-setting board is scheduled to meet on October 3, and the probability of a rate cut has been discarded.
This upward adjustment in expectations affected stock markets across the Asia-Pacific region. MSCI’s Asia-Pacific shares index dropped by 0.6 percent, the Nikkei in Japan declined by 1.4 percent, China’s blue-chip index dipped by 0.6 percent, and Hong Kong’s benchmark index shed 1.2 percent.
Among the notable declines on the ASX was Transurban, a toll-road operator, which experienced a 3.7 percent drop to an 11-month low of $12.70.
This decline followed the competition watchdog’s opposition to Transurban’s planned acquisition of Melbourne’s EastLink toll road, citing concerns about reduced competition for future road concessions in Victoria.
The energy sector also contributed to the ASX’s decline as crude oil prices saw their largest one-month drop.
Woodside, an oil and gas producer, saw a 2.6 percent reduction in its stock value to $36.04, while Santos experienced a 1.4 percent decrease to $7.59.
In contrast, Origin, a takeover target, saw its stock value rise by 0.4 percent to $8.70. AustralianSuper, the company’s top shareholder, increased its stake and stated that the stock was undervalued, potentially necessitating an increase in Brookfield’s $18.7 billion takeover offer.
Major banks, including Commonwealth Bank, NAB, ANZ, and Westpac, all registered declines ranging from 1.7 percent to 2.5 percent.
The Australian Prudential Regulation Authority is considering changes to hybrid securities, a significant source of funding for banks.
Qantas shares experienced a 0.4 percent dip to $5.31, reaching their lowest point in 11 months, amid a challenging period for the airline.
Falling iron ore prices also impacted mining giants like BHP Group, Rio Tinto, and Fortescue Metals, which saw declines ranging from 0.5 percent to 1.2 percent.
On a positive note, Fonterra’s ASX-listed shareholders fund saw a 4.5 percent increase to a one-year high of $3.23 after the New Zealand dairy exporter reported a more than doubling of annual profit to $NZ1.3 billion ($1.2 billion) and announced a higher final dividend.
Financial services provider Thorn Group rallied 2.7 percent to $1.14 following a revised buyout offer by Bermuda-based Somers. This offer followed Thorn’s sale of its asset portfolio to non-bank lender Resimac Group.