Australian stocks pummeled in wake of Wall Street sell-off

The market plunged 2pc by noon as the key index hit its lowest mark in two months in the wake of Wall Street’s rout.

The sharemarket lost more than $30bn in value to noon. Pic: Toby Zerna

The red ink that stained US markets on Friday night has quickly spread, with concerns around the fading impact of monetary policy forcing the Australian sharemarket below where it started the year.

At 12pm (AEST), the benchmark S & P/ASX 200 index wilted 108.9 points, or 2.04 per cent, to 5,230.3, while the broader All Ordinaries index slumped 110.4 points, or 2.03 per cent, to 5,330.1.

The vicious sell-off had by noon wiped around $31 billion from the local market and left the benchmark index at its lowest mark in two months.

Australia’s market was not alone in falling through the Asian session, as Hong Kong’s Hang Seng index traded 2 per cent lower and Japan’s Nikkei backtracked 1.2 per cent.

“The moves in equity and risk sentiment more broadly seem a culmination of less supportive central banks, steepening yield curves pushing up longer dated bonds and the impact this has on expensive equity valuations,” IG chief market strategist Chris Weston said.

“There is even a view, which I share, that if the Fed are really hellbent on raising this calendar year when the data doesn’t support it, it is because they are doing so more out of concern about overheating valuations in corporate bond markets and therefore lower dislocations in various markets.”

Across the past three weeks the market is off 6 per cent, with the stalling rally in commodity prices a key factor.

Resources stocks were under severe pressure in lunchtime deals as a strengthening US dollar weighed heavily on commodities.

Mining giant BHP Billiton skidded 3.7 per cent to $20.01, its primary rival Rio Tinto lost 2.3 per cent to $47.47 and iron ore miner Fortescue weakened 3.3 per cent to $4.785.

In energy, Santos tumbled 5.3 per cent to $3.79, Origin surrendered 4.2 per cent to $5.185 and Woodside stumbled 2.9 per cent to $27.505.

The selling was indiscriminate, however, with a mere four stocks in the top 200 posting gains; namely Seven West Media, Southern Cross, Syrah Resources and QBE Insurance.

CMC Markets chief market analyst Ric Spooner said yield stocks were facing similar selling interest to the big miners as the latest slide extended a recent trend against high-yielding companies.

“This yield adjustment has been underway in some sections of the stock market for some weeks,” he said.

“In Australia, the yield sensitive utilities sector finished 10 per cent below its peak while the real estate investment trust sector is already 9 per cent below its peak. The financial sector is also already 4.5 per cent below its peak.

“This may mean that the current sell-off, while likely to have further to go, may not be a severe as may seem likely.”

In finance, the big banks were off between 1.4 per cent and 2.3 per cent, with ANZ the laggard and Commonwealth Bank the leader.

In retail, Coles owner Wesfarmers held up well in inching down just 0.1 per cent, while Woolworths slipped 1.3 per cent and Myer dipped 2.2 per cent.

Among other blue chips, Telstra eased 1.1 per cent to $5.005, while Qantas gave back 0.9 per cent to $3.28.

Meanwhile, the Australian dollar was trading around US75.25c, losing more ground against its US counterpart as resource-linked currencies were offloaded with vigour.