Australian shares have plunged, tracking Wall Street losses last week after US Federal Reserve Chair Jerome Powell reiterated a hawkish tone to battling inflation, while miner Fortescue Metals skidded after posting a lower annual profit.
Powell said in his speech at the Jackson Hole central banking conference that the Fed would raise rates as high as necessary to limit growth and tackle inflation, in what was said to be his bluntest language yet about what was in store for the world's biggest economy.
Global risk appetite has been bruised after his blunt remarks triggered a market rout amid a mounting risk of more aggressive rate hikes.
The ASX 200 closed down 139 points, or 2 per cent, to 6,966.
By 04:15pm AEST, the Australian dollar was down at 68.56 US cents.
All 11 sectors were lower, with the tech sector leading the losses.
Rate-sensitive technology stocks in Australia led the retreat on the benchmark, falling about 4.4 per cent, with shares of Block down 7.8 per cent at $97.50.
Fortescue shares fell 4.9 per cent after the world's fourth-largest iron ore miner took a hit to its full-year profit, which fell 40 per cent to $US6.20 billion, and slashed its final dividend from $2.11 apiece declared last year to $1.21 per share.
Energy stocks, too, showed weakness on mixed oil prices, falling 1.6 per cent. Sector heavyweights Santos and Woodside Energy skidded 0.8 per cent and 1.7 per cent, respectively.
Financials skidded 2.2 per cent, with all of the "Big Four" banks trading in the negative territory.
Bucking the trend, shares of A2 Milk climbed 9.7 per cent after posting a better-than-expected annual profit and forecasting a positive 2023.
US stocks sell-off after Powell comments
An index of global stock markets fell, while short-term US Treasury yields rose on Friday, after Mr Powell said the US economy will need tight monetary policy "for some time" before inflation is under control.
The dollar erased early losses to turn positive against a basket of currencies, while gold, which loses appeal as interest rates rise, fell after Mr Powell's comments.
Tight monetary policy "for some time" means slower growth, a weaker job market and "some pain" for households and businesses, Mr Powell said in a speech to the central banking conference in Jackson Hole, Wyoming.
"Reducing inflation is likely to require a sustained period of below-trend growth. Moreover, there will very likely be some softening of labour market conditions," Mr Powell said.
He did not hint at what the Fed might do at its upcoming September 20-21 policy meeting. Officials are expected to approve either a 50- or 75-basis-point rate increase.
Interest rate futures tied to expectations about Fed policy fell on Friday moments after Mr Powell's speech, reflecting increased chances of a third straight 75-basis-point rate hike.
"It was hawkish as expected. Powell's message is clear: the Fed is far from done in its fight against inflation," said Antoine Bouvet, senior rates strategist at ING in London.
MSCI's gauge of stocks across the globe shed 2.5 per cent, its worst day in more than two months.
Wall Street's main indexes fell, with Mr Powell's comments dragging down mega-cap growth and technology stocks.
"His comments were hawkish. He's keeping the pedal to the metal here when it comes to policy to fight inflation," said Lindsey Bell, chief money and markets strategist at Ally.
The Dow Jones Industrial Average fell 1,008 points, or 3 per cent, to close at 32,283, the S&P 500 lost 141 points, or 3.4 per cent, to finish at 4,058 and the Nasdaq Composite dropped 498 points, or 3.9 per cent, to end the session at 12,142.
European stocks slid
Meanwhile, investors also fretted over downbeat German consumer sentiment data due to rising energy costs.
Consumer morale in the euro zone's two biggest economies diverged starkly in August as French consumers benefited from fresh government measures while concerns over rising energy bills hit their German counterparts, surveys showed on Friday.
The pan-European STOXX 600 index lost 1.7 per cent.
Oil prices ended higher on Friday, boosted by signals from Saudi Arabia that OPEC could cut output, but trading was volatile as investors digested and ultimately shrugged off the Fed's warning on economic pain ahead.
Brent crude oil was up, trading at $US101.38 a barrel, by 4:15pm AEST.
ABC/Reuters
