Australian shares have fallen on Monday, as investors fretted that aggressive interest rate hikes to bring down red-hot inflation would tip the global economy into recession.
Investors are waiting to see whether the Reserve Bank will hike rates by 25 basis points or 50 basis points at tomorrow's policy meeting.
September was the second-worst month of 2022 for the ASX 200, down 513 points or 7.3 per cent.
After a short recovery in the early trade on Monday, the benchmark index reversed early gains and closed down 17 points or 0.3 per cent, to 6,457.
By 4:16pm AEDT, the Australian dollar was up at 64.30 US cents.
Interest rate-sensitive technology stocks fell 1.3 per cent, with software firm Novonix dropping 1.4 per cent and Megaport skidding 2.4 per cent.
Financials dropped over 0.3 per cent, with the "Big Four" banks shedding in the range of 0.1 per cent to 0.3 per cent.
Energy was trading in positive territory with a 1 per cent gain, as oil prices jumped on OPEC+ considering cutting output of up to 1 million barrels per day at a meeting this week to support the market.
By 4:13pm AEDT, Brent crude futures added 2.2 per cent to settle at $US87.33 a barrel.
Sector heavyweights Woodside Energy and Santos climbed 1.2 per cent and 1.1 per cent, respectively.
Global miner Rio Tinto was down 0.3 per cent after calling for the resignation of Peter Mansell, the chairman of Energy Resources Of Australia, to address the material cost and schedule overruns of the critical Ranger uranium mine.
ASX-listed shares of Janus Henderson declined 5.1 per cent after the London-based asset manager announced changes to its board, including the retirement of chairman Richard Gillingwater.
Meanwhile, baby formula maker Bubs Australia rose nearly 1 per cent on seeking permanent access to the US market after the Food and Drug Administration (FDA) spelled out how companies that have been filling a temporary shortage can become long-term suppliers.
Among the best performers were Capricorn Metals (+3.3pc), Origin Energy (+2.9pc) and Iluka Resources (+2.9pc).
On the flip side, West African Resources plunged 10 per cent on news that Burkina Faso's military leader agreed to step down after a recent coup.
Core Lithium took a tumble, down 4.1 per cent and Chalice Mining lost 5.3 per cent.
Inflation punches Wall Street again
Wall Street and global stocks slumped further on Friday, with government bond yields and the dollar holding near recent peaks, as higher-than-expected inflation capped a nasty third quarter for world markets.
Fresh personal consumption expenditures (PCE) price index data, tracked by the US Federal Reserve as it considers more interest rate hikes, showed a rise of 0.3 per cent last month after dipping 0.1 per cent in July.
Euro zone inflation also hit a record high of 10 per cent in September, surpassing forecasts, flash inflation data showed.
Federal Reserve vice-chair Lael Brainard said the US central bank would need to maintain higher interest rates for some time as part of its effort to tame inflation and must guard against lowering rates prematurely.
Quincy Krosby, chief global strategist for LPL Financial in Charlottesville, Virginia, said the new price index data "did little to assuage fears that the campaign to curtail inflation is working as quickly as hoped by the market".
All three major Wall Street indices finished down about 1.5 per cent after a day of choppy trading.
It was the third consecutive weekly decline for the S&P 500 and the Dow Jones Industrial Average, and all three indices, including the Nasdaq Composite, were down for the second month in a row.
In the first nine months of 2022, Wall Street suffered three straight quarterly declines, the longest losing streak for the S&P and the Nasdaq since the Great Recession and the Dow's longest in seven years.
World stocks down while recession fears rise
Friday's losses cap a week of global market turmoil that saw stocks and currency markets, already rocked by recession fears, sapped further by a US dollar at 20-year highs.
Asian shares outside of Japan fell 0.4 per cent on Friday, down about 13 per cent in September, their largest monthly loss since the start of the pandemic in 2020.
European shares saw some recovery, with Europe's STOXX 600 up 1.3 per cent, but they notched a third consecutive quarter of losses on worry about the impact on global growth of central banks' hiking interest rates to counter inflation.
The MSCI world equity index, which tracks shares in 47 countries, fell 0.9 per cent on Friday, down about 9.8 per cent for the month and 7.3 per cent for the quarter.
"We do not expect a sustainable rally in stocks until the Fed sees clear and multiple months of evidence that inflation is trending down," Andy Tepper, a managing director at BNY Mellon Wealth Management in Wynnewood, Pennsylvania, said in an email.
EU bonds down, US Treasury yields tick up
European government bond yields fell, while Germany's 10-year yield was virtually flat at 2.118 per cent, compared with Wednesday's peak of 2.352 per cent, an 11-year high.
US Treasury yields gained modestly.
The yield on 10-year Treasury notes was up 6.9 basis points to 3.817 per cent, the 30-year was up 7.3 basis points to 3.766 per cent, and the two-year — which typically moves in step with interest rate expectations — was up 7.4 basis points at 4.244 per cent.
Goldman Sachs strategists forecasted that the Fed would deliver rate hikes of 75 basis points in November, 50 basis points in December and 25 basis points in February for a peak rate of 4.5-4.75 per cent, according to a client note released Friday.
The Bank of England would not raise interest rates before its next scheduled policy announcement on November 3 despite a plummet in sterling, but would make big moves in November and December, a Reuters poll forecast.
European Central Bank policymakers have also voiced more support for a large rate hike.
The British pound, which was driven to all-time lows earlier this week on a combination of the dollar's strength and the government's plans for tax cuts funded by borrowing, rose about 0.35 per cent, but still suffered its worst quarter versus the dollar since 2008.
ABC/Reuters
