Battered, bruised by $50bn hit

ASX feels Wall Street pain

ASX investors were battered and bruised on Friday as a savage Wall Street sell off washed through and knocked all but a handful of companies into the red.

The ASX 200 index fell 2.16 per cent, or 159.1 points, to 7205.6 points, wiping around $50bn off its value. The 3.1 per cent slide over five days was the ASX 200’s biggest weekly fall since October 2020.

Investors were in flight mode from the opening minutes after the Nasdaq in the US plunged almost 5 per cent overnight on Thursday, while the Dow Jones Industrial Average fell 3.12 per cent.

City Index analyst Tony Sycamore said Friday’s selloff took place amid a long list of uncertainties, including the US Federal Reserve’s rate hikes, high inflation and slowing growth.

The Reserve Bank of Australia added to the negativity by massively increasing its inflation forecasts.

It expects core consumer price growth to blow out to 4.75 per cent by December, well up on its previous estimate of 3.25 per cent. In its quarterly Statement on Monetary Policy, the RBA flagged inflation would peak at 5.9 per cent this year.

The central bank expects GDP growth to rise to 4.25 per cent by December, before slowing down over the following two years.

The unemployment rate is expected to continue to fall over the next year to a low of 3.5 per cent by June, 2023. Wages are tipped to grow at a 3.75 per cent annual pace by mid-2024.

AMP Investments senior economist Diana Mousina said the short-term outlook for shares was messy and there could be more downside as markets worried about a significant economic slowdown. “But signs of US inflation peaking and solid economic fundamentals should be positive for shares on a six-to-12month view,” she said.

AMP sees stocks providing “upper single digit returns on a 12-month horizon”.

Catapult Wealth portfolio manager Timothy Haselum said Aussie shares would be dragged down if the US market corrected but it was too early to panic.

“This pullback isn’t that big a deal when you think about how hard its’ rallied,” he said.

Shaw and Partners senior investment adviser Jed Richards said his firm expected the ASX 200 to deliver total returns of 9 per cent over the next 12 months – including a 4 per cent dividend yield.

“Rates are still low so people still need an alternative to term deposits and that’s where shares will come into it,” Mr Richards said.

The worst performer on the ASX 200 on Friday was Paladin Energy, which tumbled 10.3 per cent to 74c.

Much like in the US, local tech firms copped the worst of the selling. Accounting software firm Xero lost 9.1 per cent to $85.57, WiseTech Global was 5.6 per cent down at $41.37, Appen lost 2.2 per cent to $6.55, and Altium was down 4.6 per cent to $30.64.

Only 12 stocks on the ASX 200 finished in the black on Friday.