ASX 200 closes 1.42% lower, material sector leads losses

Highlights

• Australian equity market declined today as ASX 200 closed 1.42% lower at 7,019.70 points.
• Except for energy sector, all other ten sectors closed in red in today's trading session.
• The S&P/ASX 200 Energy Sector Index (XEJ) closed 0.555% higher at 11202.800 points.
• The S&P/ASX 200 Financials Index (XFJ) closed 2.072% lower at 6054.100.

After the World Bank slashed its global growth forecast to 2.9% and warned of the 1970s stagflation-like situation, investor sentiments across the world have been hit hard, haunted by recession fears and a slowdown in the global economic growth.

When people were waiting for economic recovery after the Covid-19 pandemic became less severe, a new threat of the Russia-Ukraine crisis emerged, resulting in supply chain disruptions, soaring prices, humanitarian concerns, and so on. These two back to back challenges have shaken the world economy, and at present, there seems to be no quick solution which can end the current market uncertainty. Inflation has continued way longer than economists had expected, with central banks hiking interest rates in a bid to bring it down. 

In this context, investors are keenly waiting for the US consumer price index data, due Friday, as it will be an important indication of whether the situation is under control or not. 

Image Source: © Elnur | Megapixl.com

How did ASX 200 perform?

The Australian equity market opened lower today, thanks to a poor handover from Wall Street, where all three US indices closed in red in the overnight trading.

The benchmark index ASX 200 fell 0.67% to 7,073.30 points in the initial few minutes of trading. On the sectoral front, barring the energy sector, the remaining ten sectors were in the red today. The financial sector was hit hard, down over 2%, mainly due to the underperformance of the top four banks. The shares of four major banks fell between 2-4% as investors assessed the impact of growing interest rates on banks' profitability and bad loans. 

Eventually, at market close, the ASX 200 closed 1.42% lower, dropping 101.40 points to 7,019.70. Over the last five days, the index has lost 2.18%. 

Ten of 11 sectors closed lower, where energy was the best performing sector. Sectors including materials, financials, A-REIT, industrials, and others led to the losses in the broader market today. The S&P/ASX 200 Energy (Sector) XEJ closed 0.555% higher at 11202.800 points. 

Broadly, the last three months have been favourable for the commodities sector, while most sectors are battling and under huge pressure. The information technology sector has lost its shine as rising interest rates put pressure on the valuation of the tech companies. This year, many bigwigs like Apple Inc, Alphabet Inc., and Netflix have posted double-digit percentage declines.

It is believed that low-interest rates had spurred a rush in the internet stocks, and now, with rising rates, the decade long dominance of technology stocks in the market has come to an end. 

Who gained? Who lost?

Coming to the top ASX 200 gainers, Skycity Entertainment Group Limited (ASX:SKC), Magellan Financial Group Limited (ASX:MFG), and Megaport Limited (ASX:MP1) led the pack with 2.834%, 2.151%, and 2.000% gains, respectively. On the flip side, Lifestyle Communities Ltd. (ASX:LIC), and Appen Limited (ASX:APX) were the top losers, falling 7.659% and 7.095%, respectively.

Asian and global market

Overnight, US stocks closed lower as investors awaited key inflation data, which will be out on Friday. The S&P 500 dropped 1.08% at 4,115.77 points, the tech-dominated Nasdaq Composite Index declined 0.73% to 12,086.27 points, while the Dow Jones Industrial Average closed 0.81% lower at 32,910.90 points. 

On the other hand, the pan-European STOXX 600 index fell almost 0.57% in Europe. Credit Suisse shares gained nearly 3.8% after there were reports that an American banking giant State Street is considering a takeover bid for the troubled Swiss bank. 

Today, Asian stocks slipped, US bond yields rose, and a rising dollar pushed to a 20-year high against the yen as investors were concerned about the outlook for further rate rises ahead of the key meeting of the European Central Bank (ECB) later in the day.