With further losses, the Australian stock market has tumbled to its lowest level since late 2020

In a sixth straight day of losses, the ASX followed steep falls on world markets, as investor fears grow that interest rate hikes will end up triggering a global recession.

The carnage continued Friday on the Australian stock market, which tumbled to its lowest level since late 2020.

In a sixth straight day of losses, the ASX followed steep falls overnight on world markets, as investor fears grow that interest rate hikes aimed at cooling inflation will end up triggering a global recession.

The benchmark ASX200 plunged immediately at the opening bell, shedding 155.4 points, or 2.36 per cent, to hit 6435 in just the first hour of trade.

It recovered slightly to finish the day down 116.3 points to close at 6474.8.

The broader All Ordinaries index fell 1.77 per cent to ended the day at 6663.3.

It wrapped up a week which saw a near 7 per cent decline and more than $171bn in value go up in smoke, with big falls in IT stocks, resources, retailers and financial groups. It was the worst week for local stocks since March 2020 – and the lowest closesince November 2020.

From their high point last year, Australia shares are down 15.5 per cent, while US shares have fallen 24 per cent and global shares retreated 21 per cent.

AMP chief economist Shane Oliver

Investors on Friday largely followed the lead of Wall Street, which nosedived even further into bear territory as the S&P500 fell 3.3 per cent and the tech-focused NASDAQ lost 4.1 per cent.

“The backdrop for equities right now is about as bad as it gets,” City Index analyst Tony Sycamore said in a client note.

“Central banks’ determination to break the back of spiralling inflation at the cost of growth likely guarantees a recession during the first half of 2023.”

But AMP chief economist Shane Oliver is less certain about the outlook.

“We remain of the view that a global recession can be avoided but with central banks now hiking rates aggressively the risks have increased to the point that its now close to 50/50. Either way it’s still too early to say that shares have bottomed,’’ he said.

“As has been the case all year, the key drivers of the fall in shares remain: high and still rising inflation flowing from pandemic distortions to supply and demand made worse by the war in Ukraine and Chinese lockdowns; central banks stepping up the pace of interest rate hikes; and the rising risk that this will trigger a recession.”

In a bid to rein in a 40-year high inflation rate of 8.6 per cent, the US Federal Reserve this week boosted interest rates by 75 basis points in the biggest single move since 1994.

The Reserve Bank is now expected to continue lifting rates as well, with analysts forecasting a 50 basis point hike at its next meeting in early July.

Reserve Bank governor Philip Lowe predicted this week that Australia’s inflation would reach 7 per cent by the end of the year, more than double its target band of 2 to 3 per cent. The cash rate could get to 2.5 per cent, up from its current 0.85 per cent, he said.

Market analysts say there still remains upside in the Australian economy, which enjoys an unemployment rate of just 3.9 per cent, a near-50 year low.

Consumers also have an estimated $250 billion in savings amassed since the start of the pandemic two years ago.

The worst performer on the ASX 200 on Friday was GUD Holdings slumped 19.6 per cent to $7.73 after lowering its underlying earnings guidance. Tech stocks continued to take a pounding with Afterpay owner Block down 7.8 per cent to $81 on Friday.It has plunged more than 26 per cent over the week. The best performer on the ASX 200 on Friday was EML Payments which jumped 9.4 per cent to $1.45. The star for over the week was Polynovo which rallied 15.6 per cent to $1.34.

Originally published as With further losses, the Australian stock market has tumbled to its lowest level since late 2020