Aussie Markets Tumble as U.S. Jobs Data Sparks Recession Worries Ahead of Rate Decision
Australian shares experienced a sharp decline on Monday, with the S&P/ASX 200 index plummeting 2.6% to 7,737.3 points, putting it on track for its worst intraday performance since September 2022. This follows a 2.1% drop on Friday, as investors reacted to concerning U.S. jobs data that heightened fears of a potential recession and prompted a cautious approach ahead of the upcoming interest rate decision.
The Australian dollar showed slight resilience, trading 0.2% stronger against the U.S. dollar at A$0.65. However, the mood in the markets remained grim as the weak payrolls report from the U.S. suggested a more rapid economic slowdown than previously anticipated. Consequently, market expectations for the U.S. Federal Reserve’s September meeting shifted dramatically, with traders now pricing in a greater than 70% chance of a 50-basis point interest rate cut—up from just 22% the week prior, according to the CME FedWatch Tool.
In Australia, the Reserve Bank is expected to keep interest rates steady when it meets on Tuesday, with predictions that any cuts may not occur until the first quarter of 2025, as per a Reuters poll. This cautious outlook reflects a broader sentiment of uncertainty in the financial landscape.
The financial sector took a significant hit, dropping 3.2% and poised for its worst day since early May 2023, should current trends persist. Shares of the Big Four banks saw declines ranging from 2.8% to 3.8%, highlighting the sector’s vulnerability to changing economic conditions.
Mining stocks were also adversely affected, falling 2.6% amid a broad-based sell-off. This decline brings the sector to its lowest levels since early November 2022, with major players like BHP and Rio Tinto slipping by 2.1% and 1.8%, respectively. The drop reflects ongoing concerns about commodity prices amid the global economic slowdown.
Energy stocks mirrored the decline in global oil prices, which hit an eight-month low due to recession fears. The Australian energy sub-index fell 3%, reaching its lowest levels since mid-July 2022. Heavyweights like Woodside and Santos both experienced losses of more than 2%, as Brent crude futures dipped to $76.66 a barrel and U.S. West Texas Intermediate crude fell to $73.28.
In neighboring New Zealand, the benchmark S&P/NZX 50 index also faced pressure, dropping 1.6% to 12,252.63 points, further reflecting regional economic concerns.
Overall, the current market climate in Australia is characterized by heightened anxiety over economic stability, with investors closely monitoring global developments and central bank decisions that could impact financial conditions moving forward.
