The Australian sharemarket tumbled at the start of trading on Tuesday, as the ASX 200 played catch-up after the long weekend. In a grim start to the week's trading, the benchmark index dropped 125.70 points, or 1.46 per cent, to 8499.40 during early hours.
This decline follows a disastrous week of trading globally, with both international and domestic stocks under heavy selling pressure. The S&P 500 index of top US companies plunged 2.64 per cent, while the tech-heavy Nasdaq fell 4.18 per cent on Friday before a slight recovery on Monday. Meanwhile, South Korea's Kospi index, which is heavily exposed to technology stocks, sank more than 8 per cent.
US Jobs Data Sparks Rate Fears
The market rout was triggered by stronger-than-expected US jobs data, which raised the possibility of higher interest rates. Non-farm payrolls rose by 172,000 in May, far exceeding the forecast of 93,000. This robust employment growth has led investors to anticipate that the Federal Reserve may hike rates again.
IG market analyst Tony Sycamore noted that global sharemarkets were falling due to the strong jobs figures and expectations of higher inflation. "Coming hot on the heels of Friday's robust non-farm payrolls report, a hotter-than-expected CPI print would undoubtedly add to mounting fears of a Fed rate hike before year end," he said.
Market Expectations Shift
In response to the data, the US rates market has aggressively priced in a potential rate hike. According to Sycamore, 27 basis points of tightening are now expected by December 2026. This shift adds pressure to growth stocks, particularly in the technology sector, which are sensitive to higher borrowing costs.
The ASX 200's drop during the opening hour of trading reflects these global concerns, with investors bracing for further volatility as inflation data looms.
