ASX suffers worst week in two years

THE Australian stockmarket has notched up its worst week in two years with jittery investors renewing their sell-down as Wall Street plunges into an official market correction.

The nation’s key stockmarket index, the ASX 200, dropped another 0.9 per cent yesterday — cancelling out a two-day rebound — following another heavy bout of selling on Wall Street.

Signs that interest rates in the US will rise quicker than many investors have been expecting has sparked turmoil on the US stockmarket, which has spread across the globe.

The local market shed 4.6 per cent for the week, stripping $83 billion from the value of the nation’s 200 largest listed companies. It was the biggest weekly sell-off since the start of 2016, when investors were gripped with fear about the health of China and a plunge in commodity prices.

Unlike that rout, which was centred on resource companies, this week’s sell-down has been broad-based with virtually all blue-chip stocks dented.

Local investors switched to sell yesterday after the Dow Jones Industrial Average — a key Wall Street benchmark index — suffered another 1000- plus point fall overnight Thursday. It was the second-biggest one-day point fall in the index’s history and came hard on the heels of the record 1175-point plunge Monday.

The combined hits sent Wall Street into its first market correction — a 10 per cent drop in stocks from their peak — in two years.

The sell-down has sent investors across the globe scrambling for the exits for much of this week with Japanese shares down 10 per cent, China off 9 per cent and the eurozone los- ing about 8 per cent from their recent highs.

The trigger for yesterday’s selling was a jump in the interest paid out by 10-year US treasury bonds, which are viewed as a key guide to inflation and the likelihood of future rises.

Investors across the globe are reassessing their outlook on US interest rates after a stream of bullish updates about the strength of the world’s biggest economy.

Healthy jobs numbers and the strongest wage growth in close to a decade has prompted many to conclude the US Federal Reserve will lift interest rates faster than expected to ward off inflation.

Rising interest rates increase borrowing costs for companies, crimping their profits and making equities less attractive as an investment compared to fixed interest rate products such as term deposits or government bonds.

A decade of falling interest rates and easy money provided by banks in the US, Europe and Asia has also taken asset prices across the globe to record highs.