ASX sheds $50 billion as investors scramble for the exits

INVESTORS have stripped $56 billion off the value of the Aussie share market in a selling frenzy today as the rout that has rocked Wall Street hits home.

The ASX 200 has shed about $80 billion over two days.

INVESTORS have stripped $56 billion off the value of the Australian sharemarket as the rout on Wall Street hits home.

The ASX 200 — the nation’s key stock market index, which broadly tracks the 200 biggest listed companies by market value — closed 3.2 per cent lower.

That slump is equal to the worst single-day fall on the Australian bourse since Britain shocked financial markets across the globe by voting to leave the European Union in June 2016.

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Key equity markets in the US, Europe, Britain and Asia have all declined sharply over the past two days as the threat of inflation and higher interest rates in the US spooks Wall Street.

Aussie share investors are stampeding the exits today, taking their cues from another selling frenzy on Wall Street overnight.

The turmoil today came as the Reserve Bank kept the nation’s cash rate on hold at a record low of 1.5 per cent for the 18th straight month.

The Australian market has now shed 4.75 per cent over the past two days in a rout that has wiped about $85 billion from the value of Aussie companies.

All major blue-chip shares have been hit and the sell-off was broad based, affecting all economic sectors.

Each of the four banking majors lost ground with Westpac falling most, down 3.1 cent to $30.33. National Australia Bank was off 3 per cent at $28.32.

The Commonwealth Bank and ANZ also 3 per cent each to close at $77.40 and $27.88 respectively.

Both big miners were hit, with BHP Billiton down 2.7 per cent to $29.33 and Rio Tinto shedding 1.4 per cent to $75.43.

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Trader Peter Tuchman watched from the floor of the New York Stock Exchange overnight as the Dow plunged.

Telstra closed 3 per cent lower at $3.51, Coles-owner Wesfarmers gave up 2.8 per cent to $41 and Woolworths dropped 3 per cent to $26.84.

The two-day plunge in local stocks has wiped out the past four months of gains, taking the local bourse back to where it was in mid-October.

The sell-off today came after the Dow Jones Industrial Average — a key Wall Street benchmark index — shed 1175 points overnight Monday in its biggest one-day point decline on record.

All up, the index lost 4.6 per cent for the day, its worst one-day session in more than six years.

It has now lost about 7 per cent in two days of heavy selling, erasing Wall Street’s gains since the start of this year when it had hit new record highs.

Despite the US sell off putting global markets on edge, the Dow Jones remains more than 20 per cent higher that where it was a year ago.

Investors are dumping stocks as synchronised economic growth in major economies across the globe paves the way for higher inflation and interest rates.

Higher interest rates will increase borrowing costs for companies and make equities relatively less attractive as an investment option.

AMP Capital chief economist Shane Oliver said Wall Street had been “long overdue” for a correction following a period of unusually steady gains in 2017.

Global equities markets were likely to be hit with a period of volatility as investors adjusted their expectations about inflation and interest rate settings in the US, he said.

Meric Greenbaum looks on at the New York Stock Exchange as the Dow slides.

“Investors have been used to low interest rates — it has been a big support factor to US and global shares over the last few years,” he said.

“But in the absence of a major threat to the global economy — and I can’t see one at the moment — this is just a correction.”

While the drop in the Dow overnight Monday was it biggest one-day fall in point terms, the 777-point plunge it experienced in September 2008 during the global financial crisis stripped it of 7 per cent of its value.