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Australian shares took a significant hit, diving 2 percent in the biggest one-day drop since March, reflecting a sharp downturn on Wall Street. This drop has heightened concerns that the Federal Reserve may be lagging in its efforts to cut interest rates.
The S&P/ASX 200 Index (ASX:XJO) fell by 165.90 points, or 2 percent, closing at 7948.80. This decline comes a day after the index reached an all-time high of 8114.7. Despite this drop, the index remains on track to end the week 0.7 percent higher, following a 4.2 percent increase last month.
Sector Performance
All 11 sectors of the benchmark index were affected, with financial and energy stocks leading the losses. Major banks saw significant declines: National Bank of Australia Ltd (ASX:NAB) dropped more than 3 percent, Commonwealth Bank of Australia (ASX:CBA) fell 2.7 percent, Westpac Banking Corp (ASX:WBC) decreased by 2.3 percent, and ANZ Banking Group Ltd (ASX:ANZ) was down 2 percent.
The mining sector also experienced downturns, with Rio Tinto Ltd (ASX:RIO) retreating 2.6 percent, BHP Group Ltd (ASX:BHP) down 1.8 percent, and Fortescue Metals Group Ltd (ASX:FMG) falling 2.3 percent.
Energy companies were not immune to the market decline, despite some recovery in oil prices. Santos Ltd (ASX:STO) shed 1.8 percent, Woodside Energy Group Ltd (ASX:WDS) decreased by 2 percent, and Paladin Energy Ltd (ASX:PDN) was the biggest laggard, down nearly 12 percent.
Oil Prices
Brent crude futures bounced 0.4 percent higher to $79.84 per barrel, while U.S. West Texas Intermediate crude rose 0.5 percent to $76.68 per barrel.
Notable Performers
Block Inc (ASX:SQ2) was one of the few standout performers, rising 7 percent after announcing an upgrade to its full-year guidance and a new $3 billion (AUD 4.6 billion) share buyback program.
In contrast, ResMed Inc (ASX:RMD) reversed an early rally to end down 2.6 percent, despite posting a 9 percent increase in revenue for the April-June quarter. The company's quarterly dividends were increased by 10 percent to USD 0.53 per share. Andrew Dale, partner at ECP Asset Management, praised ResMed's performance, noting strong margins and growing demand, particularly influenced by diabetes drugs GLP1s.
U.S. Economic Impact
On Wall Street, the Dow Jones, S&P 500, and Nasdaq all saw sharp declines, led by significant drops in Nvidia Corporation (NASDAQ:NVDA) and Atlassian Corporation Plc (NASDAQ:TEAM). The decline followed a report from the U.S. Institute for Supply Management (ISM) indicating a drop in the manufacturing PMI to its lowest level since November, suggesting economic softness. Additional rate cuts by the Bank of England and potential policy easing in the U.S. further pressured bond returns.
Australian Economic Outlook
In Australia, the Reserve Bank of Australia (ASX:RBA) is anticipated to maintain the cash rate at a 12-year high of 4.35 percent for the sixth consecutive meeting. The RBA is expected to reiterate its stance that no changes are off the table. Gareth Aird, head of Australian economics at Commonwealth Bank (ASX:CBA), highlighted that the RBA will likely remain vigilant about potential inflation risks while acknowledging weak GDP growth and an uncertain economic outlook.
Stocks on the Move
- Iress Ltd (ASX:IRE) lost 1.3 percent following the sale of its UK mortgage sales business to Bain Capital for $167 million.
- Macquarie Group Ltd (ASX:MQG) fell 2 percent, signaling a potential hybrid issue raising.
- Johns Lyng Group Ltd (ASX:JLG) eased 0.6 percent on plans to acquire SSKB Strata and Chill-Rite HVAC for $57.6 million.
- Sky City Entertainment Group Ltd (ASX:SKC) declined 0.7 percent after announcing a five-day closure of its Auckland casino in September due to non-compliance with regulatory requirements.
