The Australian stock market started the week on a shaky note, following a tech sell-off in the US. A weaker-than-expected jobs report from the US on Friday heightened fears of an economic slowdown, pulling the ASX and global markets into red territory.
S&P/ASX 200 Declines Amid Broader Weakness
As of Monday morning, the S&P/ASX 200 index tumbled 47.10 points, or 0.59%, to 7,966.30. This was despite the index crossing above its 20-day moving average earlier. The index lost 1.55% over the past five days, with all 11 industry sectors trading lower. It now sits 2.24% below its 52-week high as of 1:10 pm AEST.
Biggest Losers in the ASX 200
Super Retail Group Limited and Lovisa Holdings Limited were the worst-performing stocks on Monday, dropping by 7.52% and 6.54%, respectively. Both companies dragged down the overall market, adding to the broader market losses. Other notable losers included Steadfast Group, down 6.1%, and Evolution Mining, which shed 2.5%.
Also Read: Chinese Capital Constraints on Aussie Miners: An Opportunity for Overseas Explorers?
Financial Sector Hit Hardest
The financial sector suffered the largest losses, with the big four banks taking a heavy toll. Commonwealth Bank fell by 1.5%, ANZ dropped by 1.2%, NAB declined by 1%, and Westpac lost 1.6%. Westpac was also hit by the announcement that CEO Peter King would retire after nearly five years in charge, intensifying the bank’s slide.
ASX 200 Financials (XFJ) Index Performance
The ASX 200 Financials index comprises 28 companies involved in banking, asset management, and insurance. The index fell by 0.94% on Monday. Despite being rebalanced quarterly, no exchange-traded fund (ETF) tracks this index, leaving investors with fewer options for broad exposure to this sector.
Energy Sector Struggles Amid Declining Oil Prices
The energy sector also faced significant losses, with the S&P/ASX 200 Energy index sliding by 0.91%. Over the past week, the sector lost 9.90%, reflecting a sharp drop in global oil prices. Year-to-date, the sector is down a staggering 20.93%, and the outlook remains grim as it faces mounting global challenges.
Industrials Sector Faces Mild Decline
The industrials sector also experienced losses, with the S&P/ASX 200 Industrials index down 0.45% on Monday. This index contains 22 companies, including major players in capital goods production and transportation. Though losses were milder compared to the financial and energy sectors, it still marked a decline.
Health Care Sector Falls but Retains Stability
The S&P/ASX 200 Health Care index, containing 14 companies in the healthcare equipment, services, and pharmaceuticals sectors, dipped by 0.86%. Despite the drop, the sector was relatively stable compared to others, with only a 1.78% decline over the past week.
Retail and Hospitality Face Mixed Fortunes
Premier Investments saw its shares slide nearly 5% after the company announced the termination of Smiggle’s Managing Director, John Cheston. The Just Group Board cited serious misconduct as the reason for his dismissal. This news also impacted Lovisa Holdings, where Cheston is set to become CEO next year. Lovisa’s stock dropped 5.7% following the announcement.
Fast-food chain Domino’s Pizza also saw a drop, with shares falling 2.1%. The company is preparing to defend a class action lawsuit accusing it of misleading conduct and failing to disclose weak international performance to investors.
Large-Cap Gainers: GQG Partners, Lynas Rare Earths, and Yancoal
Not all news was bad for large-cap stocks. Investment firm GQG Partners rose by 2.2%, while Lynas Rare Earths gained 1.5%. Mining company Yancoal surged by 3.8%, buoyed by news that it would be added to the ASX 200 index on September 23. The quarterly rebalancing of the index will also see the addition of Guzman y Gomez, a Mexican-themed restaurant chain, which jumped 4.8% on Monday morning.
Wall Street Plunge Rattles Global Markets
The ASX’s slide followed a sharp drop on Wall Street, where US stocks tumbled after the release of a disappointing nonfarm payroll report. The report showed that US employers added only 142,000 jobs in August, well below analyst expectations. Jobs growth for July was also revised down to 89,000.
Tech Stocks Take the Biggest Hit
Tech stocks, particularly the “Magnificent Seven,” suffered the most. Tesla plunged 8.4%, Nvidia dropped 4%, Alphabet, Google’s parent company, fell 4%, and Meta lost 3.2%. The S&P 500 lost 1.7%, the Dow Jones dropped 1%, and the Nasdaq registered a 2.6% fall, marking its worst week since January 2022.
Uncertainty Over Federal Reserve Rate Cuts
The weak jobs data has increased the likelihood that the Federal Reserve will cut interest rates later this month. However, uncertainty remains over the size of the cut. According to the CME Group’s FedWatch Tool, traders are betting on a 25-basis point cut, though there’s still a 27% chance the Fed may opt for a 50-basis point reduction.
Rate Cut Expectations Intensify
Fed Governor Christopher Waller suggested that the time has come for rate cuts, but questions remain about whether the Fed acted too late. With layoffs potentially on the horizon, investors fear that the US economy may miss the chance for a soft landing.
Wrapping Up!
The ASX’s sharp decline on Monday, driven by global market fears and sector-specific weaknesses, highlights the challenges facing investors. Uncertainty around US interest rates, combined with sectoral struggles in finance and energy, is expected to continue pressuring the market in the short term. As the Federal Reserve’s decision approaches, volatility may increase.
