Australian shares are set to plummet in morning trade, after Wall Street suffered its worst daily sell-off in two years.
Key points:
- Australian dollar is trading near its two-year low
- Unemployment rate is expected to drop to 3.9pc
- UK inflation surged by 9pc, its highest rate in 40 years
ASX futures dropped 1.8 per cent to 7,046 points, by 7:10am AEST on Thursday.
The Australian dollar was trading at 69.5 US cents, after falling 1.1 per cent.
The Dow Jones index shed 1,165 points, or 3.6 per cent, to 31,490, its heaviest single-day loss since June 2020. It was the lowset close for the Dow since March 2021.
The S&P 500 closed 4 per cent lower at 3,924, also its worst drop since June 2020. The benchmark index is down about 17 per cent since the year began.
The Nasdaq Composite plunged 4.7 per cent to 11,418, the largest drop in the tech-heavy index since May 5. It has also plummeted about 27 per cent in the past five months.
In economic news, the Bureau of Statistics (ABS) will give release its latest figures on the state of the job market, at 11:30am AEST.
Reuters-polled economists expect Australia’s unemployment rate may drop to 3.9 per cent, its lowest level since the 1970s, and for 30,000 extra workers to be hired.
Inflation here for ‘even longer’
US retailer Target lost a quarter of its value in one trading day, after confirming it was the latest victim of surging inflation.
Its March-quarter profit fell by half and the company warned of a bigger margin hit on rising fuel and freight costs.
Its shares fell by 25 per cent, its worst session since the Black Monday crash on October 19, 1987.
“We think the developing impact on retail spending as inflation outpaces wages for even longer than people might have expected is a principal factor in causing the market sell-off today,” said Paul Christopher, head of global market strategy at Wells Fargo Investment Institute.
“Retailers are starting to reveal the impact of eroding consumer purchasing power.”
Interest-rate sensitive mega-cap growth stocks added to recent declines. Tesla, Nvidia, Amazon, Apple and Microsoft all fell sharply.
UK inflation hits 40-year high
European markets also fell sharply, including Britain’s FTSE (-1.1pc), Germany’s DAX (-1.3pc) and France’s CAC (-1.2pc).
The gloomy mood was underscored by a 9 per cent surge in the United Kingdom’s consumer prices and a faster-than-expected acceleration in Canada.
British inflation surged to its highest annual rate since 1982 as energy bills soared, according to the Office for National Statistics.
Knock-on effects from Russia’s invasion of Ukraine mean those bills are likely to jump again in October.
Last month, the International Monetary Fund forecast Britain in 2023 faced slower economic growth and more persistent inflation than any other major economy.
Meanwhile, Canadian inflation rose to 6.8 per cent last month.
It was largely driven by food and shelter prices, which have surged to levels not seen since the early 1980s, Statistics Canada data showed.
Prices are rapidly rising worldwide, forcing central banks to hike interest rates despite their likely impact on growth.
‘Fearful of the next six months’
“The cons outweigh the pros for growth stocks at this particular moment, and the market is trying to decide how bad it’s going to get,” said Liz Young, head of investment strategy at SoFi.
“The market is fearful of the next six months. We may find out that it doesn’t need to be as fearful as this, and markets do tend to overreact on the downside.”
Rising inflation, the conflict in Ukraine, prolonged supply chain snarls, pandemic-related lockdowns in China and monetary policy tightening by central banks have weighed on financial markets recently, stoking concerns about a global economic slowdown.
On Wednesday (local time), Wells Fargo Investment Institute said it expects a mild US recession at the end of 2022 and early 2023.
Brent crude futures dropped 2.7 per cent, to $109 a barrel.
Federal Reserve Chair Jerome Powell vowed on Tuesday that the US central bank will raise rates as high as needed to kill a surge in inflation that he said threatened the foundation of the economy.
Traders are pricing in 50-basis point interest rate hikes by the Fed in June and July.
Spot gold was steady at $US1,815.83 an ounce.
Oil prices dipped in volatile trade as markets weighed expectations that China will ease COVID-19 restrictions against an unexpected fall in US crude stockpiles as refineries processed more crude.
Brent crude futures slumped 2.4 per cent to $US109 barrel.
ABC/Reuters
Posted , updated
George is Digismak’s reported cum editor with 13 years of experience in Journalism