Jumpy traders wipe billions off Australian sharemarket

The ASX fell 3.5 per cent on Tuesday.

The ASX fell 3.5 per cent on Tuesday.

Australian investors joined in the dramatic four-day-old global sharemarket sell-off on Tuesday, with jumpy traders wiping almost $60 billion off the value of the ASX 200.

Australia’s main share market index lost 3.5 per cent of its value over the course of the day, pushing it to a four month low, and well below the symbolic 6000 point mark.

Most of the losses were suffered in the first 10 minutes of trading, after markets opened at 10am.

But huge as it was, losses on the Aussie market were nothing compared to the losses suffered on the Japanese stock market, where as of 3:50 pm AEDT the Nikkei 250 had lost a massive 6.35 per cent of its value.

That likewise took it to a four month low.

Hong Kong’s Hang Seng Index, meanwhile, was down almost 5 per cent, while Shanghai’s SSE Composite Index was down more than 2 per cent.

The dramatic losses on Asia-Pacific markets followed a second day of losses on the US markets, following Friday’s initial fall.

Tech stock index the NASDAQ was down 3.73 per cent, the S&P500 was down 4.10 per cent, and the Dow Jones Industrial Average was down 4.6 per cent.

Treasurer Scott Morrison downplayed the drama, saying the big dive on the US stock market was a recalibration associated with recent economic data.

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.”

What’s going on?

Patersons economic strategist Tony Farnham said investors in the US were grappling with several issues, including the returns they could get from relatively risk-free Treasury bonds, the yields of which are rising, compared to those they can get from riskier assets such as stocks.

Wall Street has also been affected by stock-specific stories, such as US bank Wells Fargo tumbling 10 per cent after being stopped from growing its asset book until it gets various compliance issues in order, he said.

Some recent profit results from the likes of tech giants Google and Apple have also failed to inspire investors.

Furthermore, he said there was continued debate over whether the US Federal Reserve is going to increase interest rates more than three times this year, as strengthening jobs and wages data point to a risk of increased inflation.

“These sorts of things tend to roil markets if they’re more aggressive than what people are expecting,” Mr Farnham said.

“That’s washed across to us.”

Looking at the Australian context, he said major Australian companies were probably strong enough to survive the sell-off unscathed.

“The major banks, major resources and major retailers – the big end of town – will be there at the end of all this, barring some absolutely catastrophic stock-specific story.”

Mr Farnham said investors’ attention will likely turn toward the local company reporting season on Wednesday, when market heavyweight Commonwealth Bank announces its half-year results.

– with AAP

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