The Australian share market has suffered its worst day in more than four years as rising fears of a US recession sparked global panic selling.
The benchmark S&P/ASX200 index today dropped 293.6 points, or 3.7% to 7649.6 — its biggest single day fall since May 2020.
That amounts to a loss of 5.81%— or AU$160 billion (NZ$173.9 billion)— for the local bourse over the past two days of trading, after it finished 2.11% lower on Friday.
Darkening the outlook for trading on Wall Street, early Monday the future for the S&P 500 was 2.4% lower and that for the Dow Jones Industrial Average was down 2.6%.
The broader All Ordinaries dropped 311 points, or 3.81%, to 7859.4.
Not since March 2020, when markets were spooked by the outbreak of the Covid-19 pandemic, has the ASX experienced such a vicious two-day sell-off.
"The markets are in meltdown and it's a sea of red across the world," said capital.com analyst Kyle Rodda.
US unemployment hit three-year high
Local traders joined a rout in global equities that was sparked by the US unemployment rate unexpectedly jumping to a near three-year high of 4.3% on Friday.
Shares surged to stratospheric heights earlier this year on frenzied buying of stock in companies expected to thrive thanks to advances in artificial intelligence.
Stocks began tumbling in earnest on Friday after weaker than expected data on US jobs fanned worries that high interest rates meant to tame inflation might push the US economy into a recession.
That triggered the Sahm rule, which holds that a recession is likely underway if the three-month average of the unemployment rate rises by half a percentage point in a year.
However, NAB senior economist Taylor Nugent said it doesn't necessarily mean the US will enter a recession, and strong growth in labour force participation will somewhat temper the rise in unemployment.
This was little comfort for Japanese shareholders, who saw the Nikkei tumble by as much as 13% on Monday in its worst day since 1987.
Rodda said a rally in the yen after the Bank of Japan raised interest rates last week hit equities and prompted a mass deleveraging as investors sold assets to fund their losses.
"The rapidity of the move has caught a lot of investors off guard; there's a lot of panic selling now, which is what causes these non-linear reactions in asset prices to pretty straightforward fundamental dynamics," he said.
A positive for traders out of Monday's carnage: it is now almost certain the Reserve Bank board will not raise the cash rate at Tuesday's meeting.
"A lot can change seemingly overnight in the world of central banks and what we've seen transpire over the past week certainly speaks to this," said T. Rowe Price portfolio manager Scott Solomon.
"Markets saw a nearly 50% chance of a hike by the RBA before the end of the year get completely turned on its head, with markets now pricing nearly a 100% chance of a cut before the year is out."
After the tech-heavy Nasdaq sank 2.43% on Wall Street on Friday, IT stocks led the way down on the ASX, down 6.61%. The remaining 10 industrial sectors were also more than 1.5% in the red.
Australia's biggest company by market capitalisation, BHP, was down 2.1%, while fellow iron miner Fortescue fell 1.9% and Rio Tinto edged 0.1% lower.
Traders laid waste to the Big Four banks, with CBA down 5.7%, NAB falling 4.6% and ANZ and Westpac both ending 4.5% lower.
Oil and gas giant Woodside fell 3.6% to a two-and-a-half year low of AU$26.48 (NZ$28.80) amid reports the proposed AU$30 billion-plus (NZ$32.6 billion-plus) Browse development off Western Australia failed to get state environmental approval.
Health care stocks were the least worst hit, falling 1.8%.
Sleep apnoea device manufacturer ResMed was one of Monday's few winners, up 2.9% to AU$32.73 (NZ$35.60) after reporting positive earnings results last week.
But it was not so positive for private hospital operator Ramsay Health Care, which retreated 0.3% after flagging its full-year earnings, to be announced later in August, will be weaker than expected.
One Australian dollar slumped to 64.08 US cents (NZ$1.08) after buying 65.25 US cents (NZ$1.10) at Friday's ASX close.
— additonal reporting from The Associated Press
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