The Australian sharemarket experienced a sharp decline on Wednesday, driven by a surge in US bond yields to multi-decade highs and uncertainty surrounding the federal budget. The ASX 200 closed 1.26 per cent lower at 8496.6, while the All Ordinaries index dropped 1.27 per cent, or 112.5 points, to 8717.0.
Global factors weigh on market sentiment
The market was particularly sensitive to a rise in global bond yields, which reached levels not seen in decades. This offset any optimism regarding a potential resolution to the Iran conflict. Yields surged as higher energy prices, fueled by the war, stoked inflation fears, increasing the likelihood of an interest rate hike in the United States.
Commodity prices decline
Gold prices fell 0.3 per cent to US$4475.06 per ounce, while Brent crude oil dropped 1.26 per cent to US$109.88 per barrel. The decline in oil came after US President Donald Trump announced he was close to ordering an attack on Iran before calling it off. The Australian dollar edged up 0.02 per cent to 71.09 US cents.
Volatile week for the ASX
The market had a turbulent start to the week, suffering its worst losses in seven weeks on Monday before recovering on Tuesday. Wednesday's decline erased those gains, as investors grappled with both domestic and international pressures.
Biggest losers and winners
Mining stocks were predominantly in the red. Siren Gold Limited plummeted 27.71 per cent to six cents, and Carnegie Clean Energy dropped 24.76 per cent to under eight cents. On the positive side, technology companies performed well, with Catapult Sports jumping 17.71 per cent to $3.39.
Banking sector under pressure
All four major banks recorded declines. 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 housing tax reforms announced in the federal budget on May 12 are creating uncertainty for banks. "Changes to the capital gains tax discount and negative gearing could negatively impact the bank's ability to write new loans," he said. "The banks are also under pressure from net interest margins and stretch valuations."
Sector performance
Eight of the eleven ASX sectors ended lower. Materials posted the biggest decline of 2.12 per cent, with Rio Tinto falling 1.94 per cent to $175.19, BHP dropping 1.89 per cent to $57.59, and Fortescue declining 1.55 per cent to $21.54. Telecommunications fell 1.67 per cent, with REA Group down 2.85 per cent to $164.18 and Telstra slipping 0.63 per cent to $5.51. Consumer staples were the best performers, rising 0.15 per cent, with Woolworths gaining 0.88 per cent to $34.51 and Coles up 0.77 per cent to $21.51.
Company news
Webjet shares 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. James Hardie Industries also fell 0.86 per cent to $26.55 after reporting a 75 per cent slump in full-year profit, citing higher inflation and slower home-building activity in North America.
