ASX slumps as bond market rattles Wall Street, oil prices jump

The Australian sharemarket declined on Thursday, as oil prices rallied back over the $US100-a-barrel mark and a surprisingly strong report on the US economy sent bond yields sharply higher.

The S&P/ASX 200 was down 78.8 points, or 0.9 per cent, at 8686.50 shortly before midday AEST, having closed flat in the previous session. However, the market pared some of its bigger early losses after a report showed Australia’s unemployment rate has climbed to its highest level since the disruptions of the COVID-19 pandemic, stoking some hopes for a reprieve on interest rate rises.

The national unemployment rate hit 4.6 per cent in August, up from 4.5 per cent in July, the Australian Bureau of Statistics said . It’s the worst result in almost five years. The Australian dollar edged down 0.3 per cent to US70.19¢.

The uptick in the jobless rate, however, is unlikely to stop the Reserve Bank from raising interest rates further when its monetary policy board is meeting next week. Earlier this week, RBA governor Michele Bullock said an unemployment rate “between 4.5 and 5” per cent would probably be needed to ease inflationary pressures.

The ASX’s midday losses were paced by the mining and financial heavyweights, which account for more than half of the ASX. Copper and iron ore giants BHP and Rio Tinto fell 2.3 per cent and 0.9 per cent, respectively. Gold producers also suffered as bullion prices fell as renewed strength in oil prices reinforced bets that the Fed will raise interest rates to fight inflation. Northern Star fell 2.1 per cent, and Evolution Mining dropped 1.5 per cent.

The big four banks were also down sharply, with Commonwealth Bank losing 1.7 per cent, National Australia Bank down 1.8 per cent, Westpac down 2.1 per cent and ANZ down 1.9 per cent.

Real estate investment trusts also struggled in the face of the looming rate hikes, which makes them less attractive in the face of bonds’ rising returns. Data centre and warehouse owner Goodman Group fell 1.7 per cent and Westfield shopping centres landlord Scentre dropped 1.6 per cent.

On the interest-rate-sensitive tech front, software maker WiseTech shed 1.2 per cent and AI data centre operator NextDC slumped 4.4 per cent.

Nine Entertainment, the owner of this masthead, plunged 8 per cent after it said Amanda Laing, the managing director of its streaming and broadcast unit, is leaving after less than two years in the job. The surprise move came a day after the media group said Australian Financial Review editor-in-chief James Chessell was leaving to join independent media website Rampart .

Premier Investments jumped 6.7 per cent even after the owner of chains such as Smiggle and pyjama brand Peter Alexander said its overall profits more than halved to $129.2 million as parents pulled back on buying Smiggle’s stationery for children in the cost-of-living crisis. Total revenue fell 2.1 per cent to $795.5 million.