• The ASX tumbled over 2% on Friday and 4% for the week
  • All 11 sectors were sold off today, with rates sensitive sectors suffering the most
  • This comes as the Fed unleashed its third straight 75bp hike on Wednesday

Aussie shares tumbled 2% on Friday, bringing its loss for the week to 4%.

At 6,571 points, the ASX 200 is now at its lowest point in more than two months after the Fed’s third straight 75bp hike.

Investors are also bracing for the worst after Fed Chairman Powell said that he expected a hard landing.

“No one knows whether this process will lead to a recession or, if so, how significant that recession would be,” Powell said yesterday.

The bond market is certainly pointing to a possible recession in the US, with the 2yr vs 10 yr spread now widening to as much as 57bp.

Evidence suggests that if short-term rates are significantly higher than long-term rates, then it’s a sign of a recession.

Jim Caron, portfolio manager and chief fixed income strategist at Morgan Stanley Investment Management, said that he was surprised at the increase in the Fed’s forecast of their terminal policy rate to 4.5% – 4.75% from 3.8%.

“The path of rate hikes corresponds to a 75 bps hike at the November 2022 meeting, a 50 bps hike in December 2022, and a 25 bps hike in January 2023,” Caron said.

“While the front-loading of rate hikes may address inflation risks in the near term, it also increases the risks of recession in the longer term. This will weigh on asset valuations and tighten financial conditions,” he added.

Other global central banks also moved to crush inflation this week.

The Bank of England increased its rates by 50bp, the Swiss National Bank by 75bp, Norway by 50bp, and Canada is expected to hike by 50bp. Only Japan has bucked trend, electing to retain its dovish stand.

In other markets, oil is headed for a weekly decline as higher rates dimmed the outlook for energy demand.

Gold has been quite choppy this week since breaking below US$1,680 last week. It has fluctuated largely around $1,650 since then, and even briefly moved above in the aftermath of the Fed decision to trade now at US$1,668.78 an ounce.

“Perhaps that’s a sign of a floor appearing, with the market now having priced in a large amount of tightening,” said OANDA’s Craig Erlam.

On the ASX today, all 11 sectors got belted with rates sensitive stocks suffering the most. Consumer Discretionary, Tech and Real Estate stocks tumbled across the board.

Looking ahead to tonight’s Wall Street session, the US Sep S&P Global manufacturing PMI and Global services PMI are scheduled, along with EU flash PMI and the EU’s Sep GfK consumer sentiment.

BIG CAP WINNERS

Swipe or scroll to reveal the full table. Click headings to sort.

Wordpress Table Plugin

Coal stocks like New Hope (ASX:NHC) and Whitehaven (ASX:WHC) continued their climb today as Putin declared an immediate “partial mobilisation” of Russian citizens to fight in the Ukraine.

OZ Minerals (ASX:OZL) was up 1% as the company’s board approved the development of its fourth major new copper and nickel project, the West Musgrave copper-nickel project in WA which will cost approximately $1.7 billion.

BIG CAP LOSERS

Swipe or scroll to reveal the full table. Click headings to sort.

Wordpress Table Plugin

Block Inc (ASX:SQ2) fell 9% today due to negative sentiment on tech stocks.

Other tech stocks to crumble on Friday include Megaport (ASX:MP1) and Xero (ASX:XRO),  down by 6% each.