The Australian sharemarket experienced its steepest decline in nearly a year on Wednesday, triggered by escalating fears of a broader conflict in the Middle East and its potential impact on global inflation. The S&P/ASX 200 index plummeted 190 points, a 2.1 per cent drop, settling at 8887.30 by mid-afternoon AEDT. This sell-off erased almost $70 billion from the market capitalisation as investors moved away from risk assets.
Selling pressure intensified across Asian markets, with South Korea’s benchmark index facing significant losses as investors withdrew funds. Concerns over rising oil prices and their inflationary effects weighed heavily on sentiment, leading bond traders to scale back expectations of US interest rate cuts. Moomoo Australia dealing manager Paco Chow noted that markets are acknowledging the potential for the Iran conflict to be prolonged and more disruptive to the global economy than initially anticipated.
Adding to inflation worries in Australia, GDP data revealed a stronger-than-expected 2.6 per cent expansion in the fourth quarter. Money markets are now pricing in a 33 per cent chance of a second rate increase from the Reserve Bank later this month. The downturn affected all 11 industry groups on the ASX, with materials, banks, and the rate-sensitive property sector leading the decline.
In company news, ARN Media, an Australian media and entertainment company, saw a slight rise, while Endeavour Group, a retail drinks and hospitality business, reported a drop in net profit. Treasury Wine Estates, a wine company whose CFO is retiring, experienced gains despite the widespread market downturn. AUB Group, a network of insurance brokers, saw a slight decline after completing its share purchase plan.
