Australia’s share market took a hit on Thursday after Wall Street suffered a horror day, its worst in eight months.
Shortly before markets closed on Thursday the benchmark ASX 200 was down more than 2.6 per cent to 5,899, while the All Ordinaries index was down a similar amount to 6,006 points.
Every sector was trading lower, with health care (-2.8 per cent), energy (-2.6 per cent) and materials (-2.4 per cent) facing the biggest losses.
— CommSec (@CommSec) October 11, 2018
The dire session came after Wall Street suffered its worst trading day in eight months as the Dow Jones Industrial Average plummeted 832 points to 25,599.
The S&P500 suffered its biggest one-day fall since February, ending Wednesday with a loss of 3.29 per cent, as technology shares tumbled on fears of slowing demand. The S&P technology sector dropped 4.8 per cent, with Apple Inc down 4.6 per cent.
European markets also saw losses, with Paris, London and Frankfurt ending their sessions down on the previous day’s trading.
The bloodletting was bad enough to attract the attention of US President Donald Trump, who pointed an accusing finger at the Fed for raising interest rates.
Mr Trump sought to downplay the stock market plunge, calling the massive losses a “correction” pinning the blame on a “crazy” Federal Reserve.
A share market correction is defined as a fall of at least 10 per cent from the high point of the past 52 weeks.
“Actually it’s a correction that we’ve been waiting for a long time but I really disagree with what the Fed is doing,” Mr Trump told reporters before a political rally in Pennsylvania on Thursday.
“I think the Fed has gone crazy,” Mr Trump said.
It was hawkish commentary from Fed policymakers that triggered the sudden sell-off in Treasuries last week and sent long-term yields to their highest in seven years.
The surge made stocks look less attractive compared with bonds while also threatening to curb economic activity and profits.
The shift higher in yields also threatens to suck funds out of emerging markets, putting particular pressure on the Chinese yuan as Beijing fights a protracted trade battle with the United States.
China’s central bank has been guiding its yuan steadily weaker, breaking past the psychological 6.9000 barrier and leading speculators to push the US dollar up to 6.9234.
That has forced other emerging market currencies to weaken to stay competitive and drawn the ire of the United States, which sees it as an unfair devaluation.
The US dollar was already losing ground to the yen and the euro as investors favoured currencies of countries that boast large current account surpluses.
The euro pushed up to $US1.1538 and away from a low of $US1.1429 early in the week. The dollar fell back to 112.10 yen , a telling retreat from last week’s 114.54 peak.
That left the greenback at 95.408 against a basket of currencies.
In commodity markets, gold got a modest safety bid and edged up to $US1,193.71. Oil prices skidded in line with US equity markets, even though energy traders worried about shrinking Iranian supply from US sanctions and kept an eye on Hurricane Michael, which closed some US Gulf of Mexico oil output.
US crude was off 52 cents at $US72.65 in Asia, while Brent crude had yet to trade after falling 2.3 per cent overnight to end at $US83.09 a barrel.
The S&P 500 and the Dow marked their biggest daily declines since February 8 and technology stocks were at the centre of the carnage as rising US Treasury yields sent investors fleeing from risky assets.
US long-dated Treasury yields rose again in extension of a trend during the past few weeks fuelled by solid US economic data that reinforced expectations of multiple interest rate hikes in the next 12 months.