• ASX had worst week since 2020
  • Banks led the selloff
  • US Fed rate hike decision next week

 

Local shares slipped by more than 1% for the second straight day, with the benchmark ASX 200 index closing below the 7,000 level at 6,935.

For the week, the index was down by 4%, the worst weekly fall since October of 2020.

Investors are also keeping a close eye on the US, where the May’s inflation data will be released overnight.

“Like last Friday’s non-farm payrolls, I am expecting a very binary outcome this evening with median forecasts for the headline at 8.30%, and core inflation at 5.90% year-on-year,” said Oanda market analyst, Jeff Halley.

“A number at 8.40% or higher probably sparks a risk aversion sell-off across asset markets with the US dollar winning.

“Conversely, a print at 8.20% or lower probably sees a buy everything, sell US dollars rally, as Fed hiking expectations are pared ahead of next week’s FOMC,” he added.

Consensus says the Fed will raise by 50bps this time.

Last month, the Fed already went for a 50bp hike, the biggest increase in 20 years and marked a sharp U-turn from the loose monetary policy it pursued throughout the pandemic.

Meanwhile, all 11 sectors on the ASX fell today, with Real Estate and Mining stocks the main laggards.

For the week, it was the Banks that dragged the market lower, with the S&P/ASX 200 Financials [XFJ] index falling by 9%.

The four big banks are presently in correction territory, with shares like Commonwealth Bank (ASX:CBA), Westpac (ASX:WBC) down by 10-12% for the week.

The selloff follows the RBA’s surprise 50bp hike on Wednesday, which investors expect will put the brakes on the growth of the banks’ mortgage books.

 

BIG CAP WINNERS

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Crown Resorts (ASX:CWN) was up just 0.5% today after announcing that its suitor Blackstone Inc’s application to buy Crown has been approved.

Crown says the Western Australian Minister for Racing and Gaming, and the Gaming and Wagering Commission of Western Australia approved the takeover proposal.

 

BIG CAP LOSERS

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NZ-based financial services company Heartland Group (ASX:HGH) was the worst performing large cap, down by 12%, as investors remain nervous about the resilience of the NZ economy.

Miners like South 32 (ASX:S32) and Mineral Resources (ASX:MIN) were also some of the worst performing stocks today, down by around 3%.