Why Australian share market ended lower today?

Highlights

  • The Australian share market traded in the red territory day, following Wall Street lower.
  • The technology stocks were seen to be dragging down the domestic share market.
  • Rising COVID-19 cases prompted weakness in travel and leisure-related stocks.

Following a two-day winning streak, the Australian share market traded lower today as renewed selling pressure dragged down the US technology sector overnight. Investors turned cautious after the highest US inflation readings in decades fuelled concerns around faster monetary policy tightening in the months ahead. The recent surge in US initial jobless claims to the highest level since mid-November further dampened the market sentiments.

Good Read: ASX 200 plunges at open; Afterpay falls to 52-week low

Much like Wall Street, the technology stocks were seen to be dragging down the domestic share market on expectations for higher interest rates. Investors are possibly rotating into value and cyclical stocks from growth stocks amid prospects of improving economic conditions.

Meanwhile, investors are seen to be offloading shares that are more sensitive to interest rate hikes, like technology stocks. In the days ahead, technology stocks are expected to adjust to a more hawkish Fed, movement in bond yields and the upcoming earnings reports.

Must Read: Where is global technology sector headed in 2022?

Rising coronavirus infections in Australia, which has been putting severe strain on supply chains and causing higher hospitalisations, were also seen to be denting investors’ sentiments. The fears around the detrimental impact of the Omicron wave prompted weakness in travel and leisure-related stocks.

Concerns loom that the recent uptick in virus cases could trigger a shift in consumer behaviour, dampening domestic and international travel demand. In fact, Queensland’s latest decision to drop all vaccine, testing requirements for interstate travel also failed to soothe investors’ nerves.

 Travel Stocks fall as ASX traded in red

Resources-reliant stocks were dragging down the Australian bourse further on weaker commodity prices. While oil prices eased on concerns around potential interest rate hikes, iron ore prices bore the brunt of weakened demand for steel.

The recent pullback in oil prices can also be credited to movement controls levied in China to curb rising coronavirus infections that can hamper oil demand. Speculations are rife that an early interest rate hike by the central banks could trim liquidity in the financial markets and disrupt the commodity market amid increased competition from higher-yielding investments.

Do Not Miss: What does 2022 have in store for commodity market?

Comment


Disclaimer

Ad

GET A FREE STOCK REPORT


Top Penny Picks under 20 Cents to Fit Your Pocket! Get Exclusive Report on Penny Stocks For FREE Now.


   
We use cookies to ensure that we give you the best experience on our website. If you continue to use this site we will assume that you are happy with it. OK