The Australian sharemarket experienced a significant decline on Wednesday, driven by a surge in US bond yields to multi-decade highs and ongoing uncertainty surrounding the federal budget. The ASX 200 closed 1.26 per cent lower at 8496.6 points, while the All Ordinaries index dropped 1.27 per cent, or 112.5 points, to 8717.0.
Global bond yields fuel market jitters
Markets were particularly rattled by a rise in global bond yields to levels not seen in decades. This development offset optimism regarding a potential resolution to the Iran conflict. The surge in yields was triggered by a jump in energy prices linked to the war, which stoked further inflation fears and increased the likelihood of an interest rate hike in the United States.
Gold prices edged down 0.3 per cent to US$4475.06 per ounce, while Brent crude oil fell 1.26 per cent to US$109.88 per barrel. The drop in oil prices came after US President Donald Trump announced he was an hour away from ordering an attack on Iran but later called it off.
The Australian dollar was trading at 71.09 US cents, up 0.02 per cent.
Mining and banking sectors under pressure
Mining shares were largely in the red as gold prices declined. Among the biggest losers was Siren Gold Limited, which plunged 27.71 per cent to 6 cents. Carnegie Clean Energy dropped 24.76 per cent to just under 8 cents.
All four major banks recorded losses. Westpac fell 2.42 per cent to $35.51, ANZ dropped 2.11 per cent to $34.77, NAB declined 0.65 per cent to $36.80, and Commonwealth Bank slipped 0.15 per cent to $162.64.
VanEck market analyst Jamie Hannah noted that banks are navigating uncertainty following housing tax reforms announced in the federal budget on May 12. 'Changes to the capital gains tax discount and negative gearing could negatively impact the bank to write new loans,' he said. 'The banks are also under pressure from net interest margins as well as some stretch valuations.'
Sector performance and company news
Eight of the eleven ASX sectors recorded declines. Materials suffered the biggest drop, falling 2.12 per cent. Mining giant Rio Tinto fell 1.94 per cent to $175.19, BHP dropped 1.89 per cent to $57.59, and Fortescue slipped 1.55 per cent to $21.54.
Telecommunications declined 1.67 per cent, with REA Group dropping 2.85 per cent to $164.18 and Telstra falling 0.63 per cent to $5.51.
Consumer staples were the best-performing sector, rising 0.15 per cent. Woolworths gained 0.88 per cent to $34.51, and Coles rose 0.77 per cent to $21.51.
In company news, Webjet plunged 11.2 per cent to 44 cents after Virgin Australia announced it would re-enter the holiday packages business under its own label from July 1. Webjet had entered a trading halt on Tuesday following the announcement before resuming normal trading on Wednesday.
James Hardie Industries also fell 0.86 per cent to $26.55 after reporting a 75 per cent slump in full-year profit. The building products company attributed the decline to higher inflation and slower home-building activity in North America.
