Australian shares have finished trading slightly lower, as ongoing economic uncertainty and flaring US-China tensions weighed on global market sentiment.
The arrival of US House of Representatives Speaker Nancy Pelosi in Taipei, despite warnings from Beijing, prompted China to launch war planes around the Taiwan Strait in protest.
The ASX 200 fell by 0.4 per cent, to close at 6,969 points, having managed to claw back most of the day's losses.
At its lowest point on Wednesday morning, the benchmark index had fallen by as much as 1.1 per cent before it recovered.
In contrast, stock markets in Japan, Hong Kong and Chinese all traded higher, as they recovered slightly from yesterday's sell-off.
The Nikkei, Hang Seng and Shanghai Composite rose between 0.4 and 0.8 per cent today.
"My view is that financial markets generally are grossly underestimating the dire nature of the US and global economy right now," said Clifford Bennett, the chief economist of ACY Securities.
"Manufacturing is rolling over badly around the world, and consumer and business confidence are in some cases plummeting to all-time historic lows.
"This is not an environment where consumers and businesses will continue to spend, let alone party in the manner in which they did post-COVID.
"The very reasons for that brief yet impressive spurt of economic strength, low interest rates and massive government stimulus are gone now. Evaporated. And they are not coming back."
"Expect further severe economic retrenchment for perhaps the next 1-3 years, and it could be a very similar story for stocks.
"Investors should take note of the recent strong rally in equity markets. It may merely be the opportunity to get out, that so many around the world had hoped for."
Aussie dollar sinks
By 4:10pm AEST, the Australian dollar was trading at 69.3 US cents, following a sharp sharp loss of 1.5 per cent overnight.
The local currency fell as low as 68.87 US cents on Wednesday morning, before it recovered slightly .
The sell-off began yesterday, when the Reserve Bank lifted its cash rate target by 0.5 percentage points, which takes the new rate to a six-year high of 1.85 per cent.
RBA governor Philip Lowe said it was a "high priority" for the bank to bring inflation down from its 30-year high, in yesterday's post-meeting statement.
But he added that "the size and timing of future interest rate increases will be guided by the incoming data and the Board's assessment of the outlook for inflation and the labour market".
It appears money markets saw that as a sign the RBA may slow down its pace of rate hikes in the near future.
The weaker Australian dollar was also driven by a stronger US greenback as investors piled into currencies that are seen as "safe havens".
In that regard, the Japanese yen jumped 0.9 per cent against the greenback, and was on track for a fifth day of gains, its longest winning streak since 2020.
"There is the uncertainty surrounding Pelosi's trip to Taiwan and there's additional data, regarding economic softness," said Sam Stovall, chief investment strategist of CFRA Research.
"Regarding recession [in the United States], it’s not a question of 'if' but 'when' and how deep."
Best and worst performers
Nearly every sector on the Australian share market traded lower, with utilities and consumer discretionary suffering the biggest losses.
Some of the best performing stocks were Pinnacle Investment Management (+12.2pc), Zip Co (+8.6pc) and Lynas Rare Earths (+7.6pc).
Lynas told investors it planned to invest $500 million to expand capacity at its Western Australia-based Mt Weld mine, in an attempt to meet market demand for rare-earths materials.
The company's Mt Weld mine has deposits of rare-earths elements neodymium and praseodymium, which are in high demand for making magnets used in electric vehicles and wind energy generation, amid a global push for decarbonisation.
On the flip side, some of today's worst performers include Champion Iron (-3.2pc), ASX Ltd (-3.4pc), Domino's Pizza (-3.3pc) and InvoCare (-2.1pc).
ASX delays software overhaul by 20 months
The Australian Securities Exchange (ASX Ltd) has revealed it will delay an overhaul of its main share trading software by up to 20 months, citing problems achieving "scalability and resilience".
The delay until late-2024 is the latest setback for the stock exchange operator's plans to modernise its equities clearance software Clearing House Electronic Subregister System (CHESS).
The CHESS software enables ASX's registry to manage settlement of transactions, and the exchange has been striving, since 2017, to replace with blockchain technology in a bid to cut costs for customers.
ASX, which has been battling with several software glitches, said it will engage Accenture to provide an independent review of the new CHESS application.
The bourse operator and its application software provider, Digital Asset, realised that the application required more work than anticipated.
In a joint statement, the Reserve Bank governor Philip Lowe and the Australian Securities and Investments Commission (ASIC) chair Joseph Longo expressed their disappointment on the further delay.
The review initiated by ASX was an "important step in providing assurance that the new CHESS application software will be fit for purpose," Dr Lowe added.
"It is critical that Accenture now undertake this review to provide assurance on the delivery of a resilient replacement for CHESS and a high degree of confidence in a revised go-live date," Mr Longo said.
Retail sales hit record high
Despite the cost of living surging to its highest level in decades, Australians spent a record amount of money at the shops, according to the latest Bureau of Statistics data.
Retail sales lifted 1.4 per cent in the June quarter, to $94.3 billion, its highest level ever. It was also a 5.5 per cent jump compared to the same period last year.
“Much of the growth in the June quarter sales volumes came from cafes, restaurants, and takeaway foods services, which rose 8.6 per cent over the quarter and continued their post-lockdown resurgence,” said Ben Dorber, head of retail statistics at the ABS.
There was also a strong rise in clothing, footwear and personal accessory sales (up 3.9 per cent), and at department stores (up 3 per cent).
“The top three retail industries in the June quarter were all hit hard during lockdowns," Mr Dorber added.
"Since the end of the Delta lockdowns, they have all continued to recover quickly, as they have returned to more usual trading conditions.”
The upbeat result will offer some comfort to the RBA that consumers can withstand its aggressive tightening of monetary policy, though more timely data suggests some people are cutting back on non-essentials.
Harry Ottley, an economist at Commonwealth Bank, noted internal data on the bank's cards showed spending on recreation, general retail, household goods and eating and drinking out had all eased over July.
"It is likely the increased cost to mortgage holders will put more downward pressure on household consumption," he said.
"We are now seeing a moderation alongside other forward looking data like home prices, home lending and building approvals."
This is a major reason why CBA expects the RBA's cash rate target to peak around 2.6 per cent, well short of market pricing.
'An open question' about further rate hikes
On Wall Street, the S&P 500 slipped by 0.7 per cent, to end the session at 4,091 points.
The Nasdaq declined 0.2 per cent, to 12,349, while Dow Jones index fell 1.2 per cent, to 32,396.
On the economic front, a report from the Labor Department showed job openings in the United States dropped by 5.4 per cent in June, a sign that the job market is weakening amid softening demand.
Since the US Federal Reserve raised interest rates by 0.75 percentage points in July, investors have been speculating about whether the central bank's largest hikes are already behind it.
"The market has to get really comfortable that they have fully baked in all the Fed's rate hikes, and I think that remains an open question," said Rob Haworth, senior investment strategist at US Bank Wealth Management in Seattle.
"The challenges and supply constraints aren't necessarily done. They aren't done and gone yet."
Oil prices slipped ahead of the OPEC+ meeting of oil producers expected this week, the outcome of which could mean a boost to global crude supply, while lingering recession fears helped cap those gains.
Brent crude futures fell 0.4 per cent, to $US99.63 a barrel.
Spot gold dropped 0.7 per cent, to $1,760.24 an ounce.
BHP boosts nickel exploration amid EV boom
Mining giant BHP will increase its spending on nickel exploration over the next two years to meet growing demand for the raw material used in making electric vehicle batteries, the chief of its nickel operations said.
BHP, through its Nickel West unit, has supply agreements for the metal with Tesla and Toyota, and this month also announced a deal with Ford.
The miner said it has the second-largest nickel sulphide resource base globally — based on its land holdings (totalling 120,000 hectares) in the Agnew-Wiluna belt in Western Australia.
The area has in excess of 7.4 million tonnes of nickel that still remains largely unexplored, Jessica Farrell, Asset President for BHP Nickel West, said.
"This year will be the highest annual spend for exploration in Nickel West," she told an industry conference in Kalgoorlie, without providing an investment number.
By 2030, around 60 per cent of all car sales globally will be electric, increasing to 90 per cent of all car sales by 2040, Ms Farrell said.
She added that BHP expects "demand for nickel in the next 30 years will be 200 to 300 per cent of demand in the previous 30 years."
ABC/Reuters
