Market wrap: ASX falls as Wall Street reacts to spending concerns

Australia’s sharemarket dipped after setting a 50-day high, with growing unease over US spending plans sparking a cautious turn among global investors.

Australia’s sharemarket slipped on Thursday after a strong recent run, as concerns over US fiscal policy rattled investors.

The benchmark S&P/ASX 200 dropped 38.10 points, or 0.45 per cent, to 8,348.70, giving back some of the gains that had lifted the index to a fresh 50-day high earlier in the week.

The broader All Ordinaries index remains 3.09 per cent off its 52-week high, though it is still up 0.62 per cent over the past five days.

Ten of the 11 sectors ended the day in the red, with materials the only one to go up, rising 0.60 per cent.

Financials shed 1.06 per cent, while healthcare and real estate posted losses of 0.32 per cent and 0.78 per cent, respectively.

Buy-now-pay-later firm Zip Co posted one of the day’s biggest losses, which slid 6.50 per cent to $1.87 followed by Nufarm Limited, tumbling 6.41 per cent to $2.63.

Other notable declines included Paladin Energy (down 4.92 per cent), Healius (down 4.33 per cent), and Polynovo, which fell 4.03 per cent.

Three of the major banks finished lower, with Commonwealth Bank the weakest performer, down 1.29 per cent to $172.72. NAB slipped 0.72 per cent to $37.37, Westpac lost 0.67 per cent to $31.36, and ANZ was unchanged at $28.85.

The Australian dollar edged higher to US 64c.

Strong performers included Spartan Resources (up 5.29 per cent) and West African Resources (up 5.22 per cent).

According to Capital.com senior financial market analyst Kyle Rodda, the sharp market movement may be linked to ongoing debates in Congress over the proposed US tax bill.

He said the ASX mirrored overnight weakness on Wall Street, which has also been responding to the same concerns.

“The reason for that is that the markets are concerned that all this extra spending is going to be quite inflationary and lead to much higher interest rates,” Mr Rodda said.

“A lot of this is narrative driven – trade narrative.”

According to Mr Rodda, investors may now be pricing in the possible consequences of the proposed tax legislation.

He said momentum had already started to slow over the past few days as recent trade deals began to cool investor enthusiasm, and the tax bill has now shifted the market’s tone toward “greater caution.”

Despite the dip, gold stocks were one of the few strong performers, lifted by rising gold prices as cautious investors looked for safer options.

Among the top performers were Lynas Rare Earths, up 6.97 per cent, Genesis Minerals, which added 5.78 per cent, and Northern Star Resources, up 5.36 per cent, alongside strong gains across several gold and resource stocks.

“Gold is one of the shining lights at the moment just on the basis that gold prices are moving back into those record highs,” Mr Rodda said.

He noted that US trade policy had influenced the precious metal’s rise, with some investors now viewing gold as a “safe haven”.

Originally published as Market wrap: ASX falls as Wall Street reacts to spending concerns