Stock markets ducked for cover on Wednesday after a normally measured Federal Reserve governor warned of a stronger hiking cycle, with the ASX200 taking its biggest fall in four weeks when it opened.

However, the benchmark S&P/ASX 200 recovered during the day to close 37.7 points lower at seven-session low of 7490 points, a 0.5 per cent decline. The improvement from a 1.2 per cent fall in the morning was thanks to gains in banks, travel companies, and consumer staples. Endeavour Drinks reached an all-time higher of $7.61.

MLC Asset Management portfolio manager Anthony Golowenko said comments from Federal Reserve governor Lael Brainard overnight suddenly shifted market sentiment and increased uncertainty.

“She gave a speech targeted primarily on inflation and the uneven impact on low income earners,” he said.

“Her comments about inflation getting much too high, the pace of rate rises, and shrinking the Fed balance sheet were much stronger language.”

US inflation was running at 40-year highs of 7.9 per cent in February, and expected to reach 8.3 per cent in March.

But while the US central bank sharpened its tongue about the speed of rate rises, Mr Galowenko said Australia’s central bank was dawdling.

“Unlike the Reserve Bank of Australia, if required (the Fed) is not going to mess around. This pace is going to be potentially, bigger chunks and bigger steps.”

This could mean hikes of 50 basis points at a time, which would very quickly change the flow of capital. This was creating uncertainty, he explained.

On Wall Street the S&P500 dropped to a seven-session low after these comments and the Nasdaq fell 2.3 per cent, tipping Asian markets lower.

The heavyweight materials sector declined with BHP down 1 per cent, Lynas Rare Earths down 6 per cent, Newcrest down 2.4 per cent, and Rio Tinto down 1.2 per cent.

IGO fell 1.4 per cent as its friendly takeover of Western Areas stalled.

On the ASX, the banks improved steadily throughout the day. NAB closed at a five-year high of $32.56, Commonwealth Bank gained 1.3 per cent to $105.71, and ANZ Bank gained 1.2 per cent.

Travel stocks did well with Flight Centre up 3.6 per cent and Corporate Travel up 2.2 per cent, but Qantas declined 1.4 per cent.

Consumer staples finished strongly with Woolworths, Bega Cheese, and Costa Group higher, but Coles, a2 Milk, and Treasury Wine declined. Endeavour Drinks reached a post-float high of $7.58.