The materials sector (down 1.4 per cent) also weighed on the local bourse as gold miners dropped following a 0.7 per cent drop in the spot gold price overnight. Evolution Mining (down 4.4 per cent), Northern Star (down 3.8 per cent) and Newcrest (down 1.8 per cent) all slipped. Iron ore heavyweights BHP (down 1.4 per cent), Fortescue (down 2.9 per cent) and Rio Tinto (down 1.8 per cent) also declined as the iron ore price continued to dip.

Treasury Wine Estates (down 7.9 per cent) was the biggest large-cap decliner after it said sales would be down overall across the group by 2 to 3 per cent and American rapper Snoop Dogg’s endorsement of one of its wine labels failed to produce the sales the company was hoping for.

The lowdown

JP Morgan Asset Management global market strategist Kerry Craig said Wall Street provided a negative lead for the local bourse as the sell-off in US equities continued.

“There was an overhang from last night in terms of the US and its debt ceiling,” he said. “Technology was the only sector really outperforming which is interesting given yields have been elevated.”

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Meanwhile, Craig said weaker performance by materials players could be attributed to anaemic macroeconomic data. “There was some weaker data around the purchasing managers index and less need for raw materials from China,” he said.

Looking to financials and consumer discretionary stocks, Craig said interest rates were weighing on both sectors.

“Banks are sensitive to rate outlooks,” he said. “And risks around consumers are creeping in because purse strings are getting squeezed by higher interest rates and mortgages,” he said.

On Wall Street overnight, indices fell again as stocks tumbled worldwide on worries about the economy.

The S&P 500 dropped 0.7 per cent after US House Speaker Kevin McCarthy said Republicans and Democrats remained “far apart” in their efforts to prevent a potentially disastrous default on the US government’s debt. The main US stock index is on track for its worst week in more than two months as the once-unthinkable creeps closer to possibility.

The Dow Jones Industrial Average dropped 255 points, or 0.8 per cent, while the Nasdaq composite lost 0.6 per cent

Chipmakers and AI-related companies rose after Nvidia said its sales in the June quarter would be about $US11 billion ($16.8 billion), smashing an average analyst estimate of $US7.18 billion, as the company had “incredible orders to retool the world’s data centres” to handle so-called accelerated computing for run generative AI tools such as ChatGPT.

Other markets around the world fell even more, as discouraging figures piled up on the global economy. Stock indexes tumbled 1.7 per cent in London, 1.9 per cent in Frankfurt and 1.6 per cent in Hong Kong.

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Inflation in the UK remains worse than expected, raising worries that the Bank of England may keep raising interest rates. Meanwhile, business confidence declined in Germany, Europe’s largest economy. And in China, worries remain about a weaker-than-hoped reopening from COVID restrictions as tensions rise with the United States over technology and security.

On Wall Street, the focus was squarely on Washington, where the US government could run out of cash to pay its bills as soon as June 1 unless Congress allows it to borrow more. The widespread expectation is that a default would result in tremendous economic pain.

“It will sort itself out over the next couple of weeks and end up being a positive catalyst,” said Jay Hatfield, chief executive at Infrastructure Capital Advisors.

Still, concerns are rising that Congress may not feel urgency to act unless markets fall sharply enough to force politicians’ hands. A measure of fear among stock investors on Wall Street climbed 8 per cent and is near its highest level since March. That’s when worries were flaring hottest about the strength of the banking system, as it creaked under the weight of much higher interest rates.

The yield on the two-year Treasury, which moves more on expectations for Fed action, rose to 4.37 per cent from 4.33 per cent.

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“It’s something that I am deeply, deeply apologetic for, and something that is a deep stain on our history that we have to deal with,” said Rio Tinto chairman Dominic Barton, describing the destruction of the 46,000-year-old Juukan Gorge rock shelters three years ago.

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With AP