Australian shares fall on Wall Street’s ongoing technology sell-off
Australian shares have lost all their opening gains, as the initial recovery from yesterday’s heavy losses ran out of steam.
By 11:20am AEST, the benchmark ASX 200 was down 0.3 per cent to 5,868 points.
The Australian dollar had risen (+0.1pc) to 73.2 US cents.
Resources was the best performing sector while most others, like utilities and healthcare, drifted into the red.
Some of the best-performing stocks were Whitehaven Coal (+4.9pc), Saracen Mineral (+3pc), Ooh!Media (+3.5pc) and Afterpay (+2.1pc).
On the flip side, Perenti Global (-3.5pc), Adrbi (-2.9pc) and Unibail Rodamco Westfield (-3.3pc) were among the worst performers.
Mining giants BHP (+1.3pc) and Rio Tinto (+1.6pc) were keeping the market afloat.
However, Fortescue Metals (-0.2pc) has drifted into the red, while major banks Westpac (-0.5pc), ANZ (-0.9pc), NAB (-0.4pc) and Commonwealth Bank (-0.7pc) were the biggest drags on the ASX.
Tech sell-off and BoE considers negative rates
Shares in Apple (-1.6pc), Amazon (-2.3pc) and Facebook (-3.3pc) were among the biggest drags on Wall Street.
The tech-heavy Nasdaq was hit hardest, losing 1.3 per cent to 10,910 points.
It was followed by the S&P 500, down 0.8 per cent to 3,357, and the Dow Jones, which dropped 0.5 per cent to 27,902.
From the March market lows, “this has been an amazing recovery represented by a few good tech names,” said Jake Dollarhide, chief executive officer of Longbow Asset Management.
“They had an incredible last week of August, and I think this is a rational profit-taking scenario at the moment.”
He expects tech-related names to rebound by the end of the year.
European markets also closed lower, with Britain’s FTSE down (-0.5pc) to 6,050 and Germany’s DAX falling (-0.4pc) to 13,208.
It comes after the Bank of England said it was looking more closely at cutting interest rates into negative territory, as Britain’s economy faces a triple whammy of rising COVID-19 cases, higher unemployment and a potential no-deal Brexit.
Overnight, the BoE kept its main lending rate on hold at 0.1 per cent.
It had already cut rates twice from 0.75 per cent, since the pandemic hit the UK’s economy.
Unemployment remains high in the US
Meanwhile, the number of Americans filing new claims for unemployment benefits fell last week but remains perched at extremely high levels, according to the Labor Department’s latest report.
Initial claims for state unemployment benefits fell to 860,000 in the week ending September 12, which was a decrease of 33,000 compared to the previous week.
However, almost 30 million Americans were receiving ongoing jobless benefits at the end of August, laying bare both the continuing economic and human devastation six months after the COVID-19 pandemic started in the United States.
“With nearly 30 million people unemployed and the ongoing failure of politicians to deliver additional needed fiscal stimulus, the climb out of the pandemic downturn is likely to be slower and more damaging to long-term growth than it should have been,” said Ron Temple, head of US equity at Lazard Asset Management.
‘Ultra easy’ monetary policy fails to boost market
On Wednesday (local time), the Federal Reserve pledged to keep interest rates near zero, until at least 2023, to lift the world’s biggest economy out of a pandemic-induced recession.
Fed chair Jerome Powell made clear the US labour market had a long way to go to meet the central bank’s “maximum employment” goal.
Mr Powell laid out a range of conditions to achieve maximum employment, which would trigger the case for a rate hike.
These conditions include higher wage growth, workforce participation and lower disparities in minority joblessness relative to whites.
He also said the central bank’s tools to achieve that were limited, dashing investors’ hopes of further stimulus.
“Investors love when the Fed lowers rates because they feel that’s good for market,” Mr Dollarhide said.
“But if the Fed says we need to keep rates low for longer, then people start worrying about the economy itself.”
Oil prices jumped overnight as the Organization of the Petroleum Exporting Countries (OPEC) and its allies said it would crack down on countries that fail to comply with output cuts.
OPEC also said it would plan an extraordinary meeting in October if crude prices weakened further.
Brent crude futures jumped (+2.7pc) to $US43.36 a barrel.
Spot gold fell (-0.8pc) to $US1,944 an ounce.