Investors spooked by global fear

Share market plunges $46bn

INVESTORS wiped $46bn off the value of the Australian share market as growing expectations of a pullback in global markets sparked the biggest one-day fall in four months.

The ASX 200 index closed down 142.5 points or 1.9 per cent at 7369.5 after hitting a seven-week low of 7344.3.

At its low, the index was down 2.2 per cent.

The bourse has slumped almost 3.5 per cent since it hit a record high of 7632.8 points last month.

The biggest pullback since March came after sharp falls in iron ore prices in recent months but overall market sentiment has arguably been too bullish, valuations were stretched, earnings momentum slowed and some US investment banks turned cautious on Wednesday.

Morgan Stanley downgraded US equities to underweight and global equities to equal-weight, and Goldman and Citi warned high valuations left the market vulnerable to concern about the spread of Covid variants, a flagging global economy or central bank plans to exit pandemic era stimulus.

“There’s a few shifting parts in the markets right now, but the big narrative has been the softer growth outlook and the flattening trajectory for the global economic expansion,” IG market analyst Kyle Rodda said.

A tentative plan to ease some restrictions for vaccinated people in NSW next month – contingent on the state achieving a 70 per cent Covid vaccination rate for its adult population – was in line with expectations and did not have any noticeable impact on the share market.

Westpac chief executive Peter King told federal parliament on Thursday that the bank expected the economy to emerge strongly from the current lockdowns, following a sharp contraction in the September quarter.

“We are seeing resilience from our customers, however there are clear pockets of challenge,” Mr King told the House economics committee.

NAB chief executive Ross McEwan told the same committee that the nation was experiencing a “multi-speed” economy, with some businesses “really hurting” and others doing incredibly well.

He said mining, agriculture and some parts of the manufacturing sector were among the strong performers.

“This also gives me confidence in the path ahead,” Mr McEwan said.