Share market extends losses as Wall Street slumps on rate cut worries

After posting strong gains in November and December, the local share market is off to a rocky start in 2024.

Australian shares extended their losses on Thursday after meeting minutes released by the US Federal Reverse heightened investors’ fears that interest rates would stay higher for longer.

At the closing bell, the benchmark S & P/ASX200 was 0.4 per cent, or 29.1 points, lower to 7,494.1. Seven of 11 industry sectors were in the red.

Meanwhile, the broader All Ordinaries slipped 0.3 per cent to 7,730.6.

The Australian dollar rose, adding 0.1 per cent against the greenback to reach US67.37c.

The key question facing investors is whether the US Federal Reserve will ease monetary policy as much as markets previously anticipated. Picture: AFP / Mandel Ngan.

Meeting minutes released by the US Fed on Wednesday suggested the country’s central bank is increasingly convinced its efforts to tame inflation were working as planned.

“In discussing the policy outlook, participants viewed the policy rate as likely at or near its peak for this tightening cycle, though they noted that the actual policy path will depend on how the economy evolves,” the minutes read.

But the minutes also noted an “unusually elevated degree of uncertainty” around the central bank’s next steps, and didn’t offer a timetable on when possible rate cuts would commence.

Kyle Rodda, senior financial market analyst at Capital.com said equities were readjusting expectations for the depth and timing of US rate cuts.

“The markets priced out the number of expected rate cuts at the margins, although the dynamic only led to a lift in front-end yields,” Mr Rodda said.

Overnight on Wall Street, the S & P500 was in the red for a third consecutive session, falling 0.8 per cent. The tech-heavy Nasdaq dropped 1.2 per cent while the Dow Jones slipped 0.8 per cent.

After US equities experienced strong gains in November and December, it has been a weak start for stocks in 2024. Picture: AFP / Angela Weiss.

Locally, the energy sector was the top performer, adding 1.3 per cent as oil prices jumped on fears of escalating conflict in the Middle East and the release of a statement by OPEC+ countries which reaffirmed the cartel’s “commitment to unity”. Traders had previously questioned the group’s vow to see through its voluntary supply cuts.

Brent crude prices added 0.5 per cent to near $US79 per barrel while West Texas Intermediate also climbed 0.7 per cent to over $US73 per barrel.

Sector heavyweights climbed with Santos up 1.3 per cent to $7.66, Woodside Energy firmed 1.4 per cent to $31.57 and Ampol added 1.3 per cent to $36.69.

Iron ore miners were mixed. While BHP sank 0.4 per cent to $49.58 and Rio Tinto fell 0.2 per cent to $134.50, Fortescue added 0.3 per cent to $28.93.

According to a note released by Citibank, its analysts see iron ore trading up to $US150 per tonne in coming weeks, up from its prior bullish forecast of $US140 per tonne.

Consumer staple stocks were the worst performers, shedding 1 per cent through Thursday’s session.

The sector was dragged lower by the major supermarket retailers Woolworths and Coles which slumped 1 per cent to $37.07 and 0.7 per cent to $16.10, respectively.

In a quiet day of corporate news, Westgold Resources shed 2.4 per cent to $2.03. The fall came despite the gold miner revealing it was on track to meet production targets for the 2023-24 financial year.

Originally published as Share market extends losses as Wall Street slumps on rate cut worries