ASX 200 hits 15-week low as tech, consumer stocks pace falls; recession ‘likely’ amid rate hikes

ASX 200 hits a fresh 15-week low as most sectors end in the red and energy stocks advance ahead of another likely ‘super-sized’ rate rise from Reserve Bank on Tuesday.

Another tough week is expected on the Australian sharemarket as investors face global economic headwinds and a likely interest rate rise on Tuesday. Picture: Gaye Gerard

Australia’s share market fell slightly as US and European futures slipped amid a jump in oil prices and concern about Credit Suisse.

The S&P/ASX 200 index closed down 17.3 points or 0.3 per cent at 6456.9 points after rising to 6503.5 then falling to 6414.4.

It narrowly avoided setting a two-year low as US and European futures pared some of their intraday falls despite fear that Credit Suisse may face collapse.

Trading was cautious before key events including Tuesday’s Reserve Bank meeting, Wednesday’s OPEC+ meeting and Friday’s US non-farm payrolls data.

The RBA was expected to announce another 50 basis point increase in the cash rate to a nine-year high of 2.85 per cent.

Public holidays in most states made for choppy trading as share trading volume shrank. NSW, ACT and SA were closed for Labour Day, while Queensland had the Queen’s Birthday holiday.

Monday’s fall came as US stock index futures turned down as crude oil futures jumped about 3 per cent.

Bloomberg reported that delegates to Wednesday’s OPEC+ meeting said the cartel will consider cutting output by more than 1 million barrels a day.

Energy, Utilities and Real Estate were the only sectors that closed in the green.

Woodside rose 1.2 per cent, Origin Energy gained 2.9 per cent and Dexus rose 2.3 per cent.

Brent crude oil futures were up 2.6 per cent at $US87.39 as the local share market closed.

Tech was the weakest sector, with Xero down 2.7 per cent.

Lithium and gold miners weighed on the Materials sector, with Allkem down 4.8 per cent and St Barbara down 3.4 per cent.

The big iron ore miners were mixed, with BHP up 0.2 per cent, Fortescue up 0.7 per cent and Rio Tinto down 0.3 per cent as iron ore futures slipped 1.8 per cent to $US93.70 a tonne.

Banks reversed their early rises with CBA down 0.7 per cent and NAB down 1.1 per cent.

The index was down 13.3 per cent for the year to date and 15.4 per cent below a record high daily close of 7628.9 points set in August 2021.

AMP chief economist Shane Oliver on Monday warned a recession was likely if the Reserve Bank continues accelerating rate hikes in its mission to tame inflation.

Dr Oliver has forecast a 0.25 per cent cash rate increase tomorrow but warned markets have priced in another 0.5 per cent hike and most economists were anticipating another “super-sized” escalation.

He told Sky News Australia would likely plunge into recession if the RBA wasn’t willing to pull back its rate hikes, warning their impacts have yet to show.

“If we go straight to that level tomorrow, and then continue rate hikes beyond that . (then) yes, we will go into recession and the risks of that are rising,” Dr Oliver said.

“You’ve just got to look around the world. We’ve seen it’s almost certain that Europe is going to go into recession on the back of their energy crisis. In the US I think it’s a very close call. “The risks are rising, and yet central banks remain very hawkish and prepared to tolerate a recession to get inflation back down.”

The dollar rebounded during local trade to be buying US64.40c at the close.

Originally published as ASX 200 hits 15-week low as tech, consumer stocks pace falls; recession ‘likely’ amid rate hikes