Tumble in final trading session
THE Australian stockmarket has fallen heavily on the final trading day of the financial year as investors recoil amid mounting signs the era of cheap credit is nearing an end.
Almost $ 28 billion was wiped from the value of Australia’s top listed companies yesterday following a weak lead from Wall Street and evidence of a growing willingness among central bankers to hike interest rates.
The benchmark ASX 200 index tumbled 1.7 per cent — its worst session so far this year — to 5721.5 points, retracing much of the gains made over the previous two days.
The pullback also took a little of the gloss off another sparkling financial year for the Australian bourse, which has climbed 9.3 per cent over the past 12 months but just 1 per cent since January. All sectors closed sharply in the red yesterday, with real estate and healthcare the worst as investors rebalanced portfolios.
Earlier, the US benchmark index, the Dow Jones Industrial Average, sank 0.8 per cent in its third worst session for the year.
Analysts said there was also an overarching sense that as global economic conditions strengthened, central banks were preparing to move away from emergency rate settings in place since the financial crisis, in turn making debt more expensive.
Bank of England governor Mark Carney set the tone on Wednesday when he said Britain’s central bank would debate a hike in coming months, while his Canadian counterpart Stephen Poloz reiterated his bias towards an increase, heightening expectations for a July move. The world’s most powerful central banker – Janet Yellen, chair of the US Federal Reserve – oversaw a rate hike last month, the third since December.