Aussie sharemarket hit by faltering hopes of US rate cuts

Taking its lead from Wall Street, the local benchmark slipped as rate cut expectations continued to unwind.

Australian shares plunged on Wednesday, led by a sharp sell-off in interest rate sensitive tech and real estate stocks, as traders wound back their bets for rate cuts by the US Federal Reserve.

At the closing bell, the benchmark index, the S&P/ASX200 tumbled 1.3 per cent, or 105.4 points, to 7782.5.

All 13 industry sectors, bar utilities and energy, finished in the red.

Meanwhile, the broader All Ordinaries index fared slightly worse, shedding 1.4 per cent of its value to close at 8033.6.

The Australian dollar was flat against the greenback to buy US65.19c.

Analysts are pricing in just two rate cuts by the Federal Reserve this year, with some analysts forecasting the US central bank will keep rates on hold through to 2025. Picture: AFP / Chip Somodevilla

Overnight, Wall Street slipped amid growing doubts that Fed chair Jerome Powell has done enough to tame inflation following hotter than expect job vacancies and factory output data.

While Fed policymakers reaffirmed their view that it will cut rates three times this year, bond traders trimmed their rate bet on rate cuts to just two, while yields on US 10-year treasuries rose five basis points to 4.36 per cent.

NabTrade director of investor behaviour Gemma Dale said the recent pullback in the expected timing and speed of rate cuts by the US central bank was helping to cement the view that the Reserve Bank could keep interest rates higher for longer.

“We tend to adopt a similar mentality here, particularly because our rates are still currently lower,” Ms Dale said.

“There’s no reason for the RBA to rush.”

After the benchmark had hit record highs at the end of the March quarter, Wednesday’s sell off had also been motivated by profit taking, Ms Dale added.

“Cash is looking extremely healthy at the moment … that’s a clear sign for investors that they’re going to put a little bit aside at this point in time.”

Money markets are fully priced for just one rate cut by the Reserve Bank this year. Picture: AFP / Muhammad Farooq.

Locally, tech stocks were the biggest laggards on the benchmark, diving 3.9 per cent, as sector heavyweights Wistech tumbled five per cent to $90.20, and Xero dropped 5.7 per cent to $125.01.

The real estate sector also finished sharply lower, falling 3.2 per cent, as Charter Hall, down 4.6 per cent to $13.01, and Vicinity Centres, down 4.8 per cent to $2.00, led losses.

Investors flocked to gold miners as the safe haven commodity traded at a record high above $US2288 an ounce, while oil stocks also benefited as Brent crude prices neared just shy of $US89 a barrel amid escalating conflict in the Middle East.

In corporate news, shares in Ramelius Resources added 5.3 per cent to $1.91 after the gold miner posted quarterly production of 86,928 ounces, eclipsing its previously issued guidance of up to 77,500 ounces.

Rival gold miner Westgold plunged 14.8 per cent to $2.36 after it revised its production guidance for the 2023-24 financial year to between 220,000 to 230,000 tonnes.

Karoon Energy was flat at $2.18 after it bolstered its forecast capital expenditure to $117m to $134m, up from $50m to $57m.

Optus parent, Singaporean listed telecommunications giant Singtel, southeast Asia’s largest telecom operator reiterated that it had no “impeding deal” to divest from its Australian subsidiary.