Australian shares slump as interest rate fears, Trump trade threats take over

Fears of multiple interest rate hikes and US President Donald Trump warning he won’t sign a “worthless” deal with Iran hit the Australian sharemarket hard on Wednesday.

The benchmark ASX 200 slumped 88.30 points or 0.97 per cent to 8978.40, after having its worst start to a day in three months, as it plunged 1.1 per cent before the afternoon’s trading.

Meanwhile, the broader All Ordinaries slumped 100.60 points or 1.09 per cent to 9160.30.

Australia’s dollar slipped against the greenback to buy 71.42 US cents.

The falls were widespread as seven of the 11 sectors finished in the red, led by more than 3 per cent falls in technology and mining stocks.

Hitting the mining sector hardest was the price of gold, which fell back below $US4300 ($A6017) an ounce, on rising inflation and rates fears.

Northern Star Resources slumped 4.69 per cent to $22.58, Evolution Mining sold off 1.94 per cent to $14.63 and Newmont dropped 3.25 per cent to $170.31.

The interest rate sensitive tech sector was also hit, with accounting software provider Xero down 2.47 per cent to $81.22, WiseTech Global shares slumped 5.16 per cent to $37.65 and Life360 dragged 4.81 per cent to $19.20.

Hurting the Australian sharemarket was better than expected economic growth, which investors took as a sign rates needed to rise.

While it wasn’t strong, GDP rose by 0.4 per cent in the June quarter, for a national rate of 2.1 per cent, above expectations of 0.3 per cent.

VanEck head of investments and capital markets Russel Chesler said this stronger than expected figures gives the Reserve Bank of Australia the green light to lift interest rates.

”With GDP coming in higher than expected, we don’t think the RBA will have any other choice but to increase rates at its September meeting later this month,” he said.

“In our view the RBA may very well need to raise rates, not once but twice before the end of this year to tame inflation back to its 2 to 3 per cent target.”

At the same time, oil prices hit a monthly high, as benchmark Brent Crude hit $US95 ($A133) a barrel on renewed fears of a conflict between the US and Iran.