The Australian sharemarket slid into the red for the second straight day on the back of a resoundingly negative lead from Wall Street, including the tech-heavy Nasdaq index tumbling by 2.6 per cent to its lowest level in three months.
The benchmark S&P/ASX200 index closed 1.03 per cent lower at 7332.5, while the All Ordinaries Index dropped 1.02 per cent to 7656.6.
CommSec analyst Steven Daghlian said markets overnight betted on the US Federal Reserve hiking rates faster than expected in coming months in response to inflation rising at the quickest pace in about 40 years.
“We’ve seen the bond market moving in anticipation of these rate hikes; the benchmark 10-year bond yield in the US actually rising to the highest levels in about two years,” Mr Daghlian said.
OMG chief executive Ivan Tchourilov said rate hikes would put downward pressure on equity valuations and increase the risk of holding those with lower cash flows and profitability.
Accordingly, tech stocks were also the worst performing sector here, with Megaport leading the declines.
Despite providing a trading update showing 8 per cent revenue growth over the December quarter, the company plunged 16.15 per cent to $15.32.
Brainchip bucked the trend, surging 14.52 per cent to $2.13, after announcing it had been granted a new US patent.
Mr Tchourilov said the healthcare sector was down badly as well.
“The sector saw a brief recovery in a Santa rally late last year as Omicron started to take hold; since then, there’s been a 9 per cent drop in valuations, mainly following falls in stocks with an additional listing on US exchanges, like Resmed on the New York Stock Exchange,” he said.
“Interestingly, we saw a fall in the materials sector as well.
“Most of the sell-off is coming from electric vehicle-facing sectors, notably lithium, nickel and copper.
“A correction of what’s been a stellar run is to be expected.
“However, the falling tech prices can also be linked to today’s commodity performance. Rising interest rates, a catalyst for the broad tech sell-off, is raising a question mark over the massive multiples tech stocks are currently trading at.
“Moreover, what will growth be like once borrowing becomes expensive again? The question then falls on materials, like lithium and nickel, and how much the stunted growth of technology we take away from demand.”
He said commodity prices may not be sustainable at current levels, close to record highs.
Pilbara Minerals dropped 3.89 per cent to $3.71, Allkem slumped 6.89 per cent to $10.81 and Chalice Mining backtracked 3.3 per cent to $8.18.
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Rio Tinto added 0.24 per cent to $109.91 despite UBS slapping a sell rating and an $80 share price target on the miner in the wake of its fourth quarter production results on Tuesday.
UBS said the report was slightly weaker than expected, with Rio’s 2022 guidance for Pilbara iron ore shipments, aluminium and mined copper below consensus.
It also said the iron ore price risk was skewed to the downside over the next 12 months after recent strength.
BHP retreated 0.3 per cent to $46.56 after filing its quarterly, showing a slight lift in iron ore output despite border restrictions-related rail labour shortages in Western Australia.
The mining giant also downgraded its full-year target for metallurgical coal, partly blaming a drop in output on virus-related labour shortages at its mines in Queensland, where border restrictions recently eased.
BHP warned that remained a risk for the rest of the year, saying the looming reopening of WA’s border “may introduce some short-term disruption to the operating environment” as the pandemic evolved in the state.
RBC Capital Markets mining analyst Kaan Peker said the production performance was above expectations, with BHP “continuing to post superior performance versus Rio in the Pilbara”.
Fortescue declined 1.49 per cent to $20.44 after US-based global investment management giant Capital Group became a substantial shareholder with a 5 per cent slice.
Energy stocks performed the best on the back of recent aggressive spikes in the oil price.
“Oil rose 1.9 per cent last night to $US85 per barrel … global oil prices are sitting at the highest levels in about seven years,” Mr Daghlian said.
“This is because oil markets continue to have relatively tight supply and despite Omicron spreading, demand continues to remain resilient.”
Mr Tchourilov said conflicts in Libya and the United Arab Emirates were wreaking havoc on oil and gas supply from these areas.
ANZ slid 0.66 per cent to $28.56, Commonwealth Bank fell 1.45 per cent to $99.33, National Australia Bank retreated 1.16 per cent to $29.07 and Westpac shed 0.79 per cent to $21.24.
The Aussie dollar was fetching 71.89 US cents, 52.82 British pence and 63.42 Euro cents in afternoon trade.
