US stocks suffer worst loss in eight months, Australian market tipped to plunge

CLOSE to $50 billion has been wiped from the value of the nation’s biggest companies as a vicious sell-off on Wall Street hits our shores.

CLOSE to $50 billion has been wiped from the value of the nation’s biggest companies as a vicious sell-off on Wall Street hits our shores.

The key ASX 200 index fell by 2.7 per cent today in its second worst one-day result for the year.

The index, which broadly tracks the nation’s 200 biggest listed companies, has lost about $90 billion this week and today fell back through the 6000-point barrier for the first time since June.

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Key blue chip stocks were hard hit with BHP Billiton down 3.8 per cent to $33.40, Rio Tinto off 3.3 per cent to $76.61, Coles and Bunnings owner Wesfarmers shedding 3.1 per cent to $47.45 and Woolworths 1.1 per cent lower at $27.82.

The big four banks had more than $10 billion wiped from their collective value with Commonwealth Bank shedding 2.9 per cent to $67, Westpac dropping 2.6 per cent to $26.29, National Australia Bank giving up 2.6 per cent to $26 and ANZ finishing 3.24 per cent lower at $26.01.

Tech stocks were hardest hit — mirroring the performance of their US rivals — with online payment provider AfterPay, logistics software company WiseTech Global and language and search data service provider Appen all notching up double-digit share price falls.

Gold stocks were the best performers as investors sought shelter in the traditional store of value during tumultuous times.

Specialist Meric Greenbaum works at his post on the floor of the NYSE. Picture: Richard Drew/AP

The rout followed Wall Street suffering its biggest one-day plunge in eight months as investors reassess their expectations around the pace of interest rate hikes in the world’s biggest economy and fret about trade tensions with China.

Higher interest rates increase the cost of borrowing for companies and households while the era of cheap money unleashed since the global financial crisis a decade ago has pushed US share prices to record highs.

“US markets drive the world and we have been caught up in it,” InvestSmart chief market strategist Evan Lucas said today.

Mr Lucas said investors had been betting interest rates in the US would not rise as quickly over the longer term as the US central bank, the Federal Reserve, has been warning.

Strong US economic data and bullish comments by Federal Reserve chair Jerome Powell over the past week have finally convinced traders in bonds — broadly government and corporate debt — that the Fed will raise rates steadily over the next year.

“They (investors) are finally believing that actually, hang on a minute, they (US Federal Reserve) are going to do it,” Mr Lucus said.

“Finally the bond bull has broken, the bears have taken over and said no, you are wrong and this needs to be sold off and that has happened very quickly.

“Markets react and overreact all the time. The old adage of up the stairs and down the elevator is well and truly happening in front of our eyes today.”

A headline scrolls on a television screen on the floor of the New York Stock Exchange. Picture: Richard Drew/AP

Veteran fund manager Geoff Wilson said US stocks had been due for a correction but the breadth of the sell-off in the US was a worry, with two-thirds of companies in the S&P 500 index now down by more than 10 per cent.

“It’s the longest bull market in the US and we all know that bull markets come to an end,” Mr Wilson said.

“But the breath of the fall in prices in the US is of concern.”

Mr Wilson, who founded Wilson Asset Management, said the “million dollar question” was whether the fall on Wall Street signalled the end to its stellar run since the global financial crisis.

“I think it’s very close to the end,” he said.

“Will this be a similar adjustment to what we saw in February or is this the start of a bear market — that is the million dollar question.”