ASX sinks on Wall St sell-off and US Federal Reserve fears

Aussie shares slumped on the first day of the new month as anxieties mount about US inflation and interest rates.

The Australian sharemarket slumped on Wednesday after hotter-than-expected US labour data sparked a sharp sell-off on Wall St overnight.

The benchmark ASX 200 sank 1.23 per cent, or 94.20 points, to close at 7569.9, while the broader All Ordinaries index slumped 1.26 per cent, or 100.1 points, to finish at 7831.9.

Rate sensitive technology stocks also suffered a pummelling, falling 1.53 per cent to 2968.8.

The bloodletting followed a rout on Wall St overnight on Tuesday that saw the benchmark Dow Jones fall 570 points, or 1.49 per cent, to 37,815, and the S&P 500 index plunge 1.57 per cent to 5035.

The tech-heavy Nasdaq tumbled 2.04 per cent to 15,657.

The sell-off followed the release of data on labour costs in the US, which showed the country’s Employment Cost Index rising 1.2 per cent in the March quarter, accelerating from a 0.9 per cent increase in the prior quarter.

The figure has entrenched investor fears the US Federal Reserve will hold interest rates higher for longer as it navigates new uncertainty over the trajectory of inflation in the world’s largest economy.

Capital.com senior financial market analyst Kyle Rodda said all eyes were now locked on Thursday morning’s Fed decision on interest rates and chairman Jerome Powell’s press conference.

US Federal Reserve chairman Jerome Powell will update the market on Fed interest rate policy on Thursday morning at 4.30am AEST. Picture: Justin Sullivan / Getty Images North America Via AFP

“It will be the language and guidance that could potentially change,” he said.

“The most likely scenario is that they will acknowledge the strength of the US economy, persistent inflation pressures and suggest that interest rates may need to remain at current levels for longer and maybe fewer cuts will come this year as a result.

“I tend to think that equities will still rally in that scenario because we’ve already have markets pricing out rate cuts this year.

“The really bearish scenario for equities will be if they straight up come out and say, ‘we don’t think there will be any rate cuts this year,’ maybe even start talking about rate hikes.

“I think that is really unlikely because that would be incredible whiplash for the markets, but if that were to happen, you would see stocks drop quite significantly if the language was that strong.

“My belief is that we might get a bit of a relief rally … I think they will harden their language but not quite as hard as markets fear.”

All 11 industry sectors finished in the red on Wednesday, with the energy sector leading the battered market with a near two per cent fall.

Energy giant Woodside Petroleum slumped more than two per cent, part of a broader decline in Australia’s energy sector. Picture: NCA NewsWire / Sharon Smith

The sector is down as oil prices decline on renewed prospects of a ceasefire in the Middle East, with brent crude trading near US$85 per barrel.

Energy giant Woodside tumbled 2.48 per cent to close at $27.53 a share while South Australian producer Santos slumped 2.01 per cent to end at $7.54.

Petroleum refiner and retailer Ampol extended its 3.34 per cent fall from Tuesday, shedding another 3.64 per cent to finish at $35.47.

The big banks struggled through the day, though NAB eked out a 0.08 per cent gain to end at $33.83 a share.

Commonwealth Bank fell 0.54 per cent to $113.92 while ANZ slipped 0.28 per cent to $28.08 and Westpac lost 0.69 per cent to close at $25.78.

In corporate news, national airline Qantas fell 1.19 per cent to $5.83 after reporting an apparent tech glitch that exposed customer data.

The company said there was “no indication” of a cyber security element in the failure.

Retail giant Coles lifted 1.11 per cent to $16.40 a share after CLSA and UBS analysts upgraded their outlooks for the company.

The top gainer on the ASX200 was uranium miner Paladin Energy, which leapt five per cent to $14.67.

The biggest laggard was coal miner Coronado Global Resources, which tumbled 8.43 per cent to $1.14 after reporting a sharp 19.7 per cent decline in production at its Central Queensland operations from the December to March quarter.

The Aussie dollar gained 0.11 per cent against the Greenback to buy US64.8c.

Originally published as ASX sinks on Wall St sell-off and US Federal Reserve fears