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The Australian sharemarket took little notice of Elon Musk’s mammoth $61 billion bid for Twitter on Tuesday, and was instead led to heavy losses thanks to jitters about China and interest rate rises.
The ASX200 slid as much as 2.4 per cent lower in early trading, and though it recouped some losses throughout the day it still finished down 2.1 to 7,318.
An early week drop in iron ore prices impacted the local bourse on Tuesday. Credit:Getty Images
The bleeding came mainly from the index’s market heavyweights, with oil and iron ore prices slumping on Monday evening. Fears about new coronavirus lockdowns in China fuelled the rout, and while prices recovered somewhat on Tuesday the local market was unable to shake off these fears.
BHP finished the session down 5.8 per cent lower to $45.66, while Fortescue Metals lost 6.9 per cent to $19.76.
Analysts attempted to look to the future, with Morgan Stanley analysts raising their forecasts for Brent Crude from $US120 a barrel to $US130.
“Although oil markets have short-term demand headwinds to deal with, we estimate that these are ultimately outweighed by supply issues,” Martjin Rats wrote in a note to clients.
Meanwhile, predictions about Australia’s next interest rate rise were flying thick and fast. Betashares chief economist David Bassanese was predicting a 15 basis point rise at next Tuesday’s Reserve Bank board meeting.
“I think the RBA should and will conclude it makes more sense to start off slow with a 15bps next week following the CPI, followed by a traditional 25bps move in June,” he said.
Expectations are growing for a 50 basis rate rise in the US in May after Federal Reserve chair Jerome Powell flagged the possibility last week.
Australian banking shares fell by close to 1 per cent throughout the session. Commonwealth Bank closed 0.6 per cent lower to $104.75, NAB was 1.2 per cent lower to $32.74, Westpac lost 1.3 per cent to $23.90, while ANZ finished the session down 0.6 per cent to $27.62.
Fintech EML Payments was hit hard after cutting its earnings guidance, down 38.6 per cent to $1.67.
There were few bright spots at the big end of town, though pathology operator Sonic Healthcare managed gains of 0.8 per cent to $36.69. James Hardie Industries managed to post a 1.1 per cent jump to $41.44.
Quarterly inflation data is due on Wednesday, with underlying inflation expected to land at 1.1 per cent, pushing underlying inflation above the Reserve Bank’s target of between two and three per cent.