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RBA rates unchanged and ASX takes a tumble after Wall Street sell off

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The Australian share market has slipped into the red after tech stocks tumbled on Wall Street amid continued worries about rising inflation and a potential United States debt default, while the Reserve Banks did nothing and kept interest rates unchanged as expected. 

The Australian share market fell more than 1 per cent before midday. 

At 2:34pm AEDT, the ASX 200 had came off its lows and was down by nearly two thirds of a per cent, at 7,236, with most sectors in the red.

The Reserve Bank kept the official cash rate at 0.1 per cent and said it would continue to purchase $4 billion worth of government bonds each week to help boost the economy until at least mid-February next year. 

There was no reaction on the share market to official interest rates staying on hold.  

In a statement, RBA governor Dr Philp Lowe said he did not expect the conditions which would cause the central bank to raise rates to be met before 2024.

Before the meeting, economist Stephen Koukalas said he expected the meeting to be “boring”. 

“As certain as night follows day, the RBA will maintain the target for the official cash rate and three-year Australian government bonds at 0.25 per cent.”

The Australian dollar was little changed after the RBA kept rates on hold and was buying around 72.67 US cents at 2:34pm AEST.

Oil stocks were higher after energy prices rose to a three-year high overnight. 

Brent crude oil rose 2.5 per cent, to $US81.26 a barrel, after major oil producers OPEC confirmed they would stick to their current output policy as demand for fuel rebounds. 

Spot gold rose 0.4 per cent overnight, to $US1,767.39 an ounce, which boosted gold miners on the market but it pulled back in today’s trade.

Leading the ASX 200 gainers were gold miners Gold Road Resources (+6.4pc), Silver Lake Resources (+6pc), and oil giant Woodside Petroleum (+2.6pc).

Tech stocks tracked Wall Street lower, with artificial intelligence firm Appen (-4.8pc) leading the losses, followed by buy now, pay later firm Zip (-3.8pc) and tourism firm Sealink Travel Group (-5.2pc).

According to the Australian Bureau of Statistics,, Australia made a record trade surplus in August, boosted by LNG and coal exports, despite a pullback in iron ore prices.

ANZ said consumer confidence rose 0.9 per cent last week, the fourth consecutive week of small gains.

Confidence increased in Sydney, Melbourne and regional South Australia, while it fell in Adelaide, Brisbane and Perth.

Wall Street takes a fall

US investors dumped big tech firms and other growth stocks as yields on US government Treasury bonds rose on worries about rising inflation.

The Dow Jones index fell 0.9 per cent, to 34,003, the S&P 500 lost 1.3 per cent, to 4,300, and the Nasdaq slid 2.1 per cent, to 14,255.

Apple and Amazone (both down 3 per cent), Microsoft (-2.4pc), and Alphabet (-2.1pc), the US stock market’s four most-valuable companies, all dropped.

Facebook, the fifth-most valuable company, slumped 4.9 per cent after its app, its photo-sharing platform Instagram, and messaging service WhatsApp, suffered a major outage.

Jack Ablin, chief investment officer at Cresset Wealth Advisors in the US, said the technology sector was seeing a market correction. 

“Rates were clearly too low, due in large part to central bank policies, and now as investors anticipate those policies getting clawed back, rates are moving closer to their real value.” 

US Treasury yields rose as investors fretted about the lack of a debt ceiling fix in the US Congress and looked ahead to the release this week of September employment data, which could pave the way for the tapering of Federal Reserve asset purchases.

US President Joe Biden says he cannot guarantee the government will not breach its $US28.4 trillion ($39 trillion) debt limit unless Republicans join Democrats in voting to raise it, as the United States faces the risk of a default in just two weeks.

Recent data showing increased consumer spending, accelerated factory activity and elevated inflation growth have fuelled bets that the US Federal Reserve could start tightening its accommodative monetary policy sooner than expected.

Wall Street’s main indexes were battered in September, hit by worries including the fate of a massive infrastructure spending bill and the meltdown of heavily indebted China Evergrande Group.

Yesterday the Chinese property developer suspended its shares in Hong Kong because of a pending market transaction amid speculation that another Chinese firm would buy its property business.

The S&P 500 has fallen about 5 per cent from its record high close on September 2. 

Nearly two-thirds of S&P 500 stocks have declined 10 per cent or more from their 52-week highs, including 73 stocks down more than one-fifth.

Spooking investors further, St. Louis Federal Reserve Bank president James Bullard warned that inflation could remain elevated for some time.

Some pockets of the market enjoyed a bounce, with energy stocks and utilities gaining. 

Tesla rose 0.8 per cent after the electric vehicle maker reported record quarterly deliveries that beat estimates.

The FTSE 100 index fell 0.2 per cent, to 7,011, the DAX in Germany lost 0.8 per cent, to 15,037, and the CAC 40 in France fell 0.6 per cent, to 6,478.



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