Australia has seen almost $60billion wiped off the stock market, as the trickle-down effect from a two-day US rout continues.
The worst single-day loss in three years could have wide-ranging consequences for superannuation and the job market, but interest rates remain at a record low.
‘It is an actual bloodbath,’ said Charles Schwab market analyst Ben Le Brun, who described the losses as ‘fallout’ from carnage on Wall Street.
Australia has seen almost $60billion wiped off the stock market, as the trickle-down effect from a two-day US rout continues (pictured is the ASX on Tuesday)
WHAT TRIGGERED THE STOCK MARKET BLOODBATH?
AMP Capital chief economist Dr Shane Oliver said the stock market was due for a correction, News.com.au reported.
‘There was a combination of things – the triggers have been worries about rising inflation, a more aggressive US Federal Reserve and higher bond yields,’ he said.
Ric Spooner, chief markets analyst at CMC Markets, said stocks could even rebound in coming days as shrewd investors buy at the lowest prices in months.
‘Personally I think we are getting into the valuation zones where bargain hunters will start to get interested in our market, particularly with reporting season coming up,’ he said.
INTEREST RATES
Fears have been tempered by the the Reserve Bank of Australia board, who decided to leave the cash interest rate unchanged at 1.50 per cent.
Low interest rates translate into low borrowing costs for companies, and could see equities become more sought-after for investors.
The RBA’s decision to keep interest rates low means the damage done to the Australian market is unlikely to go beyond fallout from the US crash.
‘The low level of interest rates is continuing to support the Australian economy,’ the Reserve Bank said.
‘Further progress in reducing unemployment and having inflation return to target is expected, although this progress is likely to be gradual.’
The worst single-day loss in three years could have wide-ranging consequences for superannuation and the job market, but interest rates remain at a record low(pictured is the ASX on Tuesday)
JOBS AND SUPER
Tuesday’s stock market decline is unlikely to affect the job market in the short term, while superannuation is more sensitive to share declines.
While some types of managed funds will take a hit as the effects of falling stock prices in the US reverberate, they will rebound just as quickly.
Today’s share market chaos is not expected to affect wider jobs trends, with employment continuing to grow strongly in all states.
The American market plummeted after a rapid rise in interest rates combined with a long overdue market correction.
The trickle-down effects saw the Australia Stock Exchange drop nearly 3 per cent in early trading on Tuesday.
‘It is an actual bloodbath,’ said Charles Schwab market analyst Ben Le Brun, who described the losses as ‘fallout’ from carnage on Wall Street (pictured is the ASX on Tuesday)
CRYPTOCURRENCIES
Cryptocurrencies were not immune either, with Bitcoin falling to below US$7,000 for the first time since November 2017.
Falls in Bitcoin, Ethereum and Ripple were triggered in part by news of fresh restrictions in China and by financial institutions.
Tuesday’s steep stock market decline saw the S&P/ASX 200 index fall 204 points, the worst single-day loss since September, 2015.
Wall Street slumped more than 1,100 points or 4.6 per cent on Tuesday (AEDT), extending Friday’s hefty drop amid inflation concerns potentially forcing a quicker pace of interest rate rises by the US Federal Reserve.
Today’s share market chaos is not expected to affect wider jobs trends, with employment continuing to grow strongly in all states (pictured is the ASX on Tuesday)
The Dow Jones tumbled more than 1,500 points at one stage during a frantic trading session.
Treasurer Scott Morrison said the Wall Street dive is a reaction to the latest wage data and bullish sentiment about inflation in the US.
He told reporters in Canberra the market was reacting to last week’s US wage data and more bullish sentiment about what’s happening with inflation and its impact on bond markets.
‘Markets are volatile – when they recalibrate in relation to events like this you do see a bit of these events happening,’ Mr Morrison said.
‘But people who watch these markets more and participate in them more closely than I do, I think, will see this for what it is and understand the forces behind it.’
Share market volatility aside, Trade Minister Steven Ciobo said the Australian economy is behaving ‘exceptionally strongly’.
‘We are seeking really strong economic growth in Australia. We are seeing great employment creation,’ he told Sky News.
The largest one-day Wall Street free-fall in history has led to chaos on the Australian stock market as the ASX dropped $30 billion on Monday alone