The Australian share market has wiped out all of its gains for the month, on growing fears that central bank efforts to tame rising consumer prices with inflation-busting interest-rate hikes will weaken the global economy and lead to a recession.
The ASX 200 fell 1.2 per cent, to close at 6,962 points, its lowest level since July 29.
It was after Wall Street and European markets tanked overnight as Russia's state-owned energy giant Gazprom said it would halt natural gas supplies to Europe, via the Nord Stream 1 pipeline, for three days at the end of this month.
"Given the current mood, there's obviously concerns as to whether that's going to be three days or whether it's going to be three years," said Ray Attrill, head of foreign exchange strategy at NAB.
"Is it really just going to be a three-day maintenance or is this just another example of weaponisation of gas supply into Europe?"
On Wall Street, the S&P 500 sank 2.1 per cent, to end the session at 4,138 points. The Nasdaq dropped 2.6 per cent to 12,3812, while the Dow Jones index fell 1.9 per cent to 33,064.
The Euro Stoxx 600 fell 1 per cent overnight.
Asia-Pacific markets also fell sharply, with New Zealand's NZX50, Japan's Nikkei and Hong Kong's Hang Seng down between 1 and 1.4 per cent on Tuesday.
Benchmark gas prices in the European Union surged 13 per cent overnight to a record high, and have doubled in just a month to be 14 times higher than the average of the past decade.
Meanwhile, analysts at Citi warned inflation in Britain could top 18 per cent (more than nine times the Bank of England's target) if energy prices were not restrained.
The Australian dollar was trading at 68.6 US cents, having fallen 0.2 per cent by 4:40pm AEST.
The local currency was steady at 69.1 euro cents.
Overnight, the euro hit a 20-year low against the greenback. It was weighed down by a stratospheric rise in Europe's energy prices which is stoking inflation and forcing central banks to hike rates, even at the risk of recession.
Mixed earnings from ASX companies
With the corporate reporting season in full swing, investors digested a slew of earnings reports, which are swaying the broader market in both directions.
Online retailer Kogan was one of the worst performing stocks, after it posted a full-year loss of $35.5 million (compared to a $3.5 million profit last year).
Its founder and chief executive Ruslan Kogan admitted that "we were wrong" in betting that booming e-commerce sales during the pandemic wouldn't slow and investing too much in inventory.
Kogan's share price plummeted 6.6 per cent to $3.55.
Software maker Altium said its annual profit surged 57.3 per cent, a result which beat market expectations. That led to its share price jumping 19.8 per cent.
Medical glove maker Ansell jumped 8.6 per cent, after the company provided a better-than-expected forecast for the current financial year.
Shares in retail drinks and hotel business Endeavour Group, the owner of the BWS and Dan Murphy's liquor chains, dived 12.3 per cent.
That was despite Endeavour delivering a better-than-expected $495 million full-year profit (up 11.3 per cent from the year before).
Scentre Group had risen by 2.2 per cent to $2.84 after the Westfield owner announced its half-year operating profit had risen 17.6 per cent to $540.5 million.
Chief executive Peter Allen said occupancy was at 98.8 per cent (up 0.3 percentage points from a year ago), and rents had increased to $827 per square metre (up $5 a square metre).
Boral profit sinks
The building materials maker Boral has reported a 40 per cent slump in annual profit, as construction lockdowns and heavy rains and floods in New South Wales and Queensland increased costs for the building materials maker.
The company foresees a high risk of "further adverse impact" in the current financial year due to "exceptional rainfall", but expects revenue to rise from higher construction demand.
Boral reported a net profit before significant items of $149.7 million (a steep fall compared to last year's $250.7 million profit). Those significant items included Boral's $1 billion gain from the sale of its US businesses in the past two years.
"We expect Boral to benefit from out-of-cycle national price increases to offset higher energy and other input costs," analysts at Moody's Investors Service said.
Despite initially falling, Boral's share price has since lifted 2.4 per cent to $2.96.
Markets await Powell speech
Investors were nervous as a closely monitored recession signal — the inversion of the US Treasuries' yield curve — widened overnight.
Basically, US government's two-year bonds are paying investors a higher return (3.32 per cent), compared with 10-year bonds (3.02 per cent).
In theory, people who lend money to the US government for longer periods of time should be paid a higher interest rate to reflect the higher risk.
In the past 50 years, whenever the yield curve "inverted" (or when short-term rates are higher than longer-term rates in America's bond market), a US recession tends to occur within the next 24 months.
Investors also fretted about a US Federal Reserve gathering later this week in Jackson Hole, Wyoming.
The focus will be on Fed chairman Jerome Powell's speech on Friday (local time) at the Wyoming conference for further cues on how aggressively the Fed is likely to be with future interest rate hikes.
"Powell is going to try to sound hawkish to tamp down inflationary expectations and tighten financial conditions, so that's most likely going to be a negative catalyst for the market," warned Jay Hatfield, chief investment officer at Infrastructure Capital Management in New York.
The Fed is likely to raise interest rates by 0.5 percentage points at its September meeting, according to economists polled by Reuters.
However, traders are split between a 0.5- and 0.75-percentage-point hike by the central bank after several policymakers recently pushed back against expectations of a dovish pivot and emphasised the Fed's commitment to fight against inflation.
Volatile oil prices
Oil markets were extremely volatile overnight, with prices falling 4.5 per cent at its lowest point overnight, as traders worried a global economic slowdown would affect demand.
But prices recovered after Saudi Arabia's energy minister said the Organization of the Petroleum Exporting Countries and its allies (OPEC+) could cut oil production to confront market challenges.
Brent crude futures were flat at $US96.62 a barrel.
The latest disruption to energy supplies in Europe heightened concerns about the continent's economic outlook after hawkish signals from European Central Bank policymakers.
Russian natural gas supplies to Europe are down around 75 per cent over the past year.
Meanwhile, the leaders of the United States, Britain, France and Germany discussed efforts to revive the 2015 Iran nuclear deal, the White House said on Sunday, which could allow sanctioned Iranian oil to return to global markets.
The US State Department said a nuclear deal was closer now than it was two weeks ago.
ABC/Reuters
