Australian Shares Slump to Two-Month Low
Synopsis
The ASX 200 hits a two-month low as mining stocks tumble and rising oil prices fuel inflation fears, pushing investors toward safer assets.
Key Highlights
- The S&P/ASX 200 declined 0.9% to 8,741.20 points, its weakest finish since July 2.
- The index fell 2.1% on the week, its biggest weekly loss since mid-March.
- Weaker commodity prices had mining stocks down 3.7%, led by BHP’s 4.1% fall.
- Investor sentiment throughout the week was impacted by soaring oil prices and rising inflation fears.
Australian Shares Slide to Two-Month Low As Miners Weigh Down
Australian stocks closed Friday at more than a two-month low as mining stocks, led by BHP, fell as commodity prices fell in recent days, and amid swelling inflation fears fuelled by rising oil prices over the week.
The S&P/ASX 200 index dropped 0.9% to finish at 8741.20 points, at the lowest in two months. The index finished down 2.1% for the week, its biggest weekly drop since mid-March.
Investors Become Cautious on Inflation Woes
Global investors turned away from riskier assets on Friday over worries that the conflict in the Middle East is propelling prices through oil and stubborn inflation even higher, requiring even tighter policy.
Mining Stocks Lead the Decline
Mining stocks fared even worse, with heavyweight players down 3.7 %, their biggest fall since June 19 after copper prices fell as officials are worried higher copper prices will translate to manufacturing costs.
Major miner BHP plunged 4.1% in its worst session since mid June while Rio Tinto was down 3.5%. This plunged lithium miners Liontown and PLS 8.6% and 7.4%, respectively.
Rising Oil Prices and Bond Yields Adding Pressure
Oil slipped on Friday but looked set to end the week higher, at more than $100 a barrel as investors feared long-lasting supply outages.
Hawkish signals from Reserve Bank of Australia officials and surging energy prices boosted expectations for more interest rate increases during the week. The markets are pricing 32 basis points of hikes by November and 39 basis points by December.
As a broader global bond selloff extended, yields on short-term and long-term Australian government bonds jumped above 5% to their highest levels since mid-2011.
Financial Stocks Provide Some Support
In the economic sector, financials also rose 1.1%, recovering from three days of drops in the best session since almost two weeks. New Zealand’s benchmark S&P/NZX 50 index dropped 1% to 13,580.33 points, its weakest close since late June. Attention now turns to New Zealand’s June-quarter GDP figures due on Thursday.
Source: Reuters
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