Dow Today – ASX 200 falls sharply after Dow tumbles on Wall Street; Australian dollar rises from six-month low
The Australian share market has fallen sharply, following a sell-off of US stocks on Friday.
- Commonwealth Bank shares led the losses among the big four banks
- Boral has reached a deal to sell its North American business for $2.9 billion
- Comments from the Fed’s Bullard contributed to a sell-off on Wall Street
By 12:15pm AEST, the ASX 200 was down 1.9 per cent to 7,227 points, with financial stocks posting heavy losses.
Commonwealth Bank shares were a major drag on the market, down 4.1 per cent, after the bank announced the sale of its CommInsure General Insurance business.
The Australian insurance arm has been picked up by South Africa’s Hollard Group for $625 million cash up front, along with deferred payments.
Meantime, Bank of Queensland shares were down 4.3 per cent, following the Treasurer approving its acquisition of ME Bank.
The $1.3 billion sale is now expected to be finalised next month.
“The acquisition of ME Bank is a key step in our strategy to be a compelling alternative to the big banks,” BOQ chairman Patrick Allaway said.
Elsewhere in the financial sector, AMP (-5.6pc), QBE Insurance (-5.6pc) and Bendigo and Adelaide Bank (-4.4pc) were also sharply lower.
Boral shares were down 0.3 per cent, retreating from early gains of more than 3 per cent.
The building products maker has agreed to sell its North American business to a US firm for $2.9 billion.
Just a quarter of the top 200 stocks were gaining ground, with Megaport (+2.3pc), Charter Hall Retail REIT (+1.6pc) and Metcash (+1.3pc) the best performers of the session so far.
Aussie dollar rises from lowest level since December
The Australian dollar was firmer on Monday, rising half a per cent against the greenback to around 75.2 US cents.
That’s after it hit its lowest level in six months as the US dollar strengthened.
On Friday, St. Louis Fed President James Bullard added to expectations that US interest rates could rise sooner rather than later, revealing he was one of seven Fed policymakers to predict a first rate hike in 2022.
The median projections from last week’s US central bank meeting indicate two rate hikes before the end of 2023.
“This suggests the Fed will move earlier than the R(BA) and will be moving by slightly more than the R(BA) over 2023, which has implications for the [Australian dollar],” St George chief economist Besa Deda wrote.
She expects the downward pressure on the local currency to continue before demand returns, as market expectations for Federal Reserve policy drive the US dollar higher.
Retail sales hit by Victorian lockdown
Victoria’s lockdown dampened retail sales in the state last month, with turnover dropping across all industries, except food retailing.
Nationally, Bureau of Statistics preliminary figures show retail turnover rose 0.1 per cent in May, seasonally adjusted, led by food sales, while spending on household goods and clothing dropped.
“There were mixed results across the industries and states and territories, with COVID-19 restrictions in Victoria impacting the May result,” Ben James from the ABS said.
Retail sales in Victoria dropped 1.5 per cent, as restrictions were introduced ahead of the lockdown late in the month.
Sales in Queensland and Western Australia rose 1.5 per cent.
Capital Economics economist Ben Udy said the impact of the Victorian COVID-19 situation smaller than he had expected, although a greater portion of the lockdown period fell in June.
Retail stocks were mostly lower on Monday, including Super Retail (-2.7pc) and Kogan (+1.3pc), while supermarket giant Coles (+0.9pc) and IGA owner Metcash (+1.3pc).
Dow loses 1.6pc on Fed rate rise forecasts
The rate rise expectations hit stocks on Wall Street on Friday, with the Dow Jones losing 1.6 per cent, or more than 500 points.
The energy and financial sectors led the losses on the S&P 500, with the broader index closing 1.3 per cent lower.
It was the worst week in months for the Dow and S&P, despite the major US indices starting the week at record levels.
“I’m not surprised to see the market sell off a little bit. I’m never surprised, given the strong run we’ve had for such a long period of time, when you see some periods of profit-taking,” Inverness Counsel chief investment strategist Tim Ghriskey told Reuters.