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Financial stocks slumped, with all big four banks deeply in the red. Australia’s biggest lender CBA lost 2.1 per cent, NAB was down 2.8 per cent, Westpac fell 1.9 per cent and ANZ shed 1.6 per cent. The Millionaires’ Factory Macquarie Bank declined 1.4 per cent.

Tech stocks followed the negative lead of their US peers, with WiseTech down 2 per cent, Xero losing 3.1 per cent and NEXTDC slumping 3.6 per cent.

Meanwhile, Orora was at the top of the bourse with a 6.6 per cent lift after announcing it was selling its North American packaging business to US-based Veritiv Corporation for $1.8 billion.

Not many companies were trading in the green this morning; Auckland International Airport and Resmed were among them, up 0.8 per cent and 0.4 per cent, respectively.

The Australian dollar slumped, and traded at 67.02 US cents at 12.29m AEST.

On Wall Street overnight, the S&P 500 fell more than 2 per cent as growth and monetary anxieties combined to torch risky assets much as they did a month earlier.

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Just as in the August episode, tech got hit the hardest, with AI giant Nvidia driving a plunge in chipmakers. And the parallels don’t stop there. The yen jumped, a closely watched manufacturing gauge again missed forecasts, and oil plummeted on concern about tepid global demand. Wall Street’s “fear gauge” - the VIX - soared. Treasury yields tumbled, with traders keeping their bets on an unusually large half-point Federal Reserve rate cut this year.

The S&P 500 dropped 2.1 per cent. The Nasdaq 100 slid 3.3 per cent. The Dow Jones fell 1.5 per cent. The $US22 billion ($32.8 billion) VanEck Semiconductor ETF saw its biggest plunge since March 2020, with Nvidia down 9.5 per cent. Boeing sank 7.3 per cent on an analyst downgrade.

With inflation expectations fairly anchored, attention has shifted to the health of the US economy as signs of weakness could speed up policy easing.

Swap traders are anticipating the Fed will reduce rates by more than two full percentage points over the next 12 months, which would be the steepest drop outside of a downturn since the 1980s.

The Morgan Stanley strategist who foresaw last month’s market correction says firms that have lagged the rally in US stocks could get a boost if Friday’s jobs data provide evidence of a resilient economy. A stronger-than-expected payrolls number would likely give investors “greater confidence that growth risks have subsided,” Michael Wilson wrote.

With inflation expectations fairly anchored, attention has shifted to the health of the economy as signs of weakness could speed up policy easing.

While rate cuts tend to bode well for equities, that’s not necessarily the case when the Fed is rushing to prevent a bigger US slowdown. The trepidation regarding the latest rise in the unemployment rate will leave traders “on edge” until Friday’s payrolls data is in hand, said Ian Lyngen and Vail Hartman at BMO Capital Markets.

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“This week’s jobs report, while not the sole determinant, will likely be a key factor in the Fed’s decision between a 25 or 50 basis-point cut,” said Jason Pride and Michael Reynolds at Glenmede.

Treasury 10-year yields fell five basis points to 3.85 per cent. A record number of blue-chip firms are swarming the corporate-bond market, taking advantage of cheaper borrowing costs ahead of the US presidential election. The yen climbed as Bank of Japan Governor Kazuo Ueda reiterated the central bank will continue to raise rates if the economy and prices perform as expected.

Traders are projecting the Fed will cut its rate by a full percentage point by the end of the year, implying an unusually large half-point reduction at one of the three meetings left in 2024.

What’s more, they are anticipating that the central bank will reduce its benchmark rate by more than two full percentage points over the next 12 months, which would be the steepest drop outside of an economic downturn since the 1980s.

Bloomberg

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