(AUSTRALIA) – The Australian stock market experienced its most significant decline in three weeks, driven by a sharp drop in BHP Group and mining companies due to stronger-than-expected US data, leading traders to anticipate further interest rate hikes by the Federal Reserve.
BHP contributed to the ASX’s decline as its shares traded ex-dividend. A weak performance in US markets triggered selling across Asian equity markets, causing Australia’s benchmark S&P/ASX 200 Index to fall 1.2% to 7171 points, with all 11 sectors ending in negative territory.
ASX falls on strong US services data
This decline followed the release of the Institute for Supply Management’s US services index for August, which came in at 54.4, the highest reading since February and above economists’ expectations. A reading above 50 indicates expansion.
Traders interpreted this as “bad news” for mining stocks in the short term because it raised the possibility of the Fed continuing to raise rates.
Fed funds futures now imply a 48% chance of another interest rate increase in November, up from 47% before the data was released.
BHP, which accounts for about 10% of the ASX, fell 5.2% to $43.71 as the world’s largest mining company traded ex-dividend.
The mining sector as a whole on the ASX declined by 3.2%, with Rio Tinto down 2.5% to $113.10 and Fortescue Metals dropping 2.3% to $19.87.
Despite this, Liontown Resources, a takeover target, jumped 9% to $3.02, and Chalice Mining rose 7.9% to $31.30. Meanwhile, companies like Super Retail Group and Perpetual were also trading ex-dividends, exacerbating losses.
Energy stocks fell 1.5%, despite recent gains due to a stronger oil price, with Woodside Energy and Santos both seeing declines. Coal producers Whitehaven Coal and Yancoal also experienced weaker performances.
Qantas shares continued to decline, falling 2.3% to $5.57, erasing nearly $1.5 billion in market value amid a lawsuit from the competition regulator and customer dissatisfaction.
On a more positive note, shipbuilder Austal saw a 3.2% increase in its shares after winning a $143 million contract with the US Navy, while Bendigo and Adelaide Bank rose 0.7% as it announced plans to redeem all of its $275 million subordinated notes maturing in November 2028.
However, all major banks retreated, with ANZ being the hardest-hit, falling 0.8%.
