Tens of billions of dollars have been wiped off the value of Australia's top companies as global markets sink on worries of more aggressive interest rate hikes by the US central bank.
Look back on how the day's events unfolded with our blog.
Key events
- Nearly $90 billion wiped off value of local sharemarket
- Tune in to 7.30 tonight as Leigh Sales interviews Reserve Bank Governor Philip Lowe
- Here are the best and worst performers on the ASX 200
- Australian dollar comes off morning low
- Is this the time to buy shares?
- Here's a quick recap of what's happened, and where things stand now
- How are the banks going?
- Bitcoin and other cryptocurrencies plummet due to market conditions
- Buy now, pay later service Zip the worst performer on the ASX 200
- What is a 'bear market'?
- Biggest percentage loss in a single day since March 2020
- So what does it all mean?
- Why are stocks falling?
Live updates
By Jessica Riga
We'll wrap up our live coverage here
Now that the markets have closed for the day, we'll wrap things up here.
Thank you for joining us today and for sending in your questions! And a huge thank you to business reporter Sue Lannin for joining the blog to help unpack the situation.
You can read more about 'one of the worst down days' on the Australian share market here.
And you can continue to stay up to date here on the ABC News website or on our app.
And (last thing!) a reminder, Leigh Sales is interviewing Reserve Bank Governor Philip Lowe on 7.30 tonight, so you won't want to miss that.
See you next time!
By Jessica Riga
What can we expect next?
The S&P500 futures rose 1 per cent on the open in Asian trade, while the Nasdaq Composite rose 1 per cent.
Business reporter Sue Lannin says that suggests the bargain hunters could buy up beaten day stocks overnight, but as we've warned you, "buyer beware".
But there could be more bad news out overnight with US Producer Price Index for May out. That is basically inflation at the farm and factory gate, so business inflation, which is also running hot. And on Thursday, we get the latest rate rise from the US Federal Reserve, the US central bank. Some pundits are tipping a 0.75% rise in one go. Ouch.
The Australian market came off its lows because US futures rose, which suggests that the US market could rise tonight, but depends on those business inflation figures.
By Jessica Riga
Nearly $90 billion wiped off value of local sharemarket
Nearly $90 billion has been wiped off the value of the local sharemarket today after investors took flight because of worries that rapid interest rate rises in the US could cause a recession.
The All Ordinaries fell more than five percent in early trade at its lowest point.
By the close, the index fell 3.7 per cent to 6,881, while the ASX 200 index lost 3.6 per cent to 6,686.
Energy firms and technology stocks led the falls, but all sectors were in the red.
Buy now, pay later firm Zip fell by the most on the ASX 200, losing 15 percent of its value.
The Australian dollar tumbled below 70 US cents on a stronger greenback.
It came off its lows during the day and it now buying arond 69.66 US cents.
By Jessica Riga
The ASX 200 has closed. Here's where things stand at 4:05pm AEST
By Jessica Riga
Tune in to 7.30 tonight as Leigh Sales interviews Reserve Bank Governor Philip Lowe
You'll be able to watch the interview live on ABC or catch up on iview.
On Instagram, 7.30 host Leigh Sales called it a "very, very rare" interview. When asked in the comments if she was nervous, she said yes because "it is a HUGE deal."
By Jessica Riga
How bad is it when compared to the start of the pandemic and the GFC? Is the outlook going to be grim for a while?
How bad is it when compared to the start of the Pandemic and the GFC? Is the outlook going to grim for a while?
-Matt
Hi Matt,
Our business reporter Sue Lannin has been talking to veteran market watcher Michael McCarthy, who is chief strategy officer from Tiger Brokers Australia.
Michael McCarthy says yes, because rising interest rates have changed the economic and markets equation.
Higher rates are bringing the value (prices) of assets like homes and shares down to earth because the higher cost of borrowing makes these assets less affordable.
However, Michael McCarthy warns "the sea change has yet to be reflected in share prices." So expect much more market volatility and more falls.
I was working as a finance journalist during the GFC and it was frightening. It felt like the end of the world as we know it and that the global financial system would collapse. It felt like the market was falling 10 per cent or 9 per cent every day.
Massive government and central bank stimulus saved the global financial system from disaster and Australia escaped a recession. During the coronavirus market meltdown from late February 2020 to March 2020, the Australian market lost nearly 40 per cent of its value. But all the massive government and RBA stimulus helped it bounce back, and then some, as markets rebounded to record highs.
However, the record highs are part of the problem. The markets are at record highs because interest rates have been at record lows, which means you can borrow more to buy assets. The massive stimulus encouraged investors into share markets and property because of record low interest rates.
But now as interest rates rise rapidly there is, as Michael says, a "sea change". And Michael says that "sea change has yet to be reflected in share prices."
A recession is possible in North America if the US central bank keeps raising rates aggressively. Michael McCarthy and many economists say it can't be ruled out.
And will Australia get through it? Well, the problem is our housing market is massively indebted. So if the RBA continues to raise rates then some people could be trouble. And we have are already $1 trillion debt to the rest of the world.
But if the RBA starts to ease up on rate rises, we may muddle through. So fingers crossed.
By Jessica Riga
Here are the best and worst performers on the ASX 200
Our business reporter Sue Lannin says the market has come off its lows.
The ASX 200 is down 4.4% to 6,628 while All Ordinaries is down 4.5% to 6,821.
Here are the worst performers on the ASX 200:
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Buy now, pay later service Zip is down down 17.9%
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Chalice Mining is down 14%
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Mesoblast is down 12.2%
And here are the best performers:
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Polynovo is up 2.8%
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Computershare is up 0.8%
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Uniti Group is up 0.3%
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Insurance Australia Group is up 0.2%
Meanwhile, Crown Resorts is steady.
By Jessica Riga
Let's take another look at the ASX
The Australian market plunged more than 5 per cent in the first 20 minutes of trade this morning. Here's how things are looking at 2:40pm AEST.
By Jessica Riga
How do rising interest rates help solve the cost of living crisis?
When the cost of living is already so expensive, how does raising the interest rates to INCREASE the cost of living solve the problem? Or is it more a question of making it more expensive for homeowners? I don’t understand!
-Worried and confused
Hey there, let's break it down.
When the RBA increases interest rates, many people will need to cut back on spending and tighten their budgets.
As they rein in spending, companies need to respond to a change in consumer demand and adjust their prices accordingly.
The RBA will typically keep increasing interest rates until inflation slows down.
By Jessica Riga
Australian dollar comes off morning low
The Australian dollar has come off its morning low and is buying around 69.57 US cents.
To Asian markets and the Nikkei 225 in Japan is down 1.8 per cent to 26,490, the Hang Seng in Hong Kong has lost 1.1 percent to 20,840, while the Shanghai Composite has fallen by 1.6 per cent to 3,204.
Spot gold is up 0.4 per cent to $US1825.26 an ounce, off its overnight lows.
Brent crude oil has dropped in Asian trade by 0.2 per cent to $US122 a barrel.
By Jessica Riga
Here's Sue Lannin with a markets update
At 1:50pm AEST, the All Ordinaries index is down 4.9 per cent to 6,795, while the ASX 200 index has dropped 4.8 per cent to 6,601.
The worst performer in the ASX 200 index is buy now, pay later firm Zip (-20.2pc), followed by WA based gold, nickel and cobalt miner Chalice Mining (-14pc) and biotech firm Mesoblast (-11.5pc).
The only firm going up among the top 200 companies is communications infrastructure provider Uniti Group (+0.3pc).
By Shiloh Payne
Is this the time to buy shares?
Is now the time to buy shares?
-Christie
Our business reporter Sue Lannin has been talking to veteran market watcher Michael McCarthy, who is chief strategy officer from Tiger Brokers Australia.
He has warned investors to be very cautious about seeing the current selloff as a buying opportunity because there is more pain to come.
He said the selloff could worsen because markets are massively overvalued having been pumped up by central bank and coronavirus stimulus.
So, to quote US politician Aaron Burr from Lin Manuel Miranda's epic stage show Hamilton, "wait for it". Don't be Alexander Hamilton today.
Clifford Bennett, chief economist at ACY Securities agrees.
"'Protect your portfolios' from the roof-tops we should all scream," he said.
By Jessica Riga
Here's a quick recap of what's happened, and where things stand now
Just joining us now? Let's get you up to speed:
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The Australian share market has plunged more than 5 per cent, wiping tens of billions of dollars off the value of shares
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Why? Global markets sank on worries that aggressive interest rate hikes by the US central bank could push North America into recession
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At midday, the broad All Ordinaries index was down 4.8 per cent to 6,806, with $116 billion wiped from the value of the market
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The ASX 200 index, the index of the top 200 companies, lost 4.7 per cent, or 329 points, to 6,604 at 12:15pm AEST
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Technology stocks were the hardest hit, after a sell-off on Wall Street
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The biggest loser on the ASX 200 index was buy now, pay later firm Zip, which lost almost one fifth of its value
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The Australian dollar tumbled below 70 US cents amid the stock market rout, to a low of 69.20 US cents
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At 12:25am AEST, it had come off its daily low and was trading around 69.37 US cents
By Jessica Riga
ASX plunges 4 per cent, global stocks slump on recession fears
Australian, US and global stocks have been dumped by investors as they worry more aggressive interest rate rises by the US Federal Reserve could tip the global economy into recession.
By Jessica Riga
How are the banks going?
Business reporter Sue Lannin says there were steep falls for the big banks with National Australia Bank (-4.7 per cent) and ANZ (-4.7 per cent) doing the worst, followed by the Commonwealth Bank (-4.5 per cent) and Westpac (-4.4 per cent).
By Jessica Riga
By Jessica Riga
What can we expect from the US Federal Reserve bank on Thursday morning?
There are expectations there will be a 75-basis point increase. Does Jun Bei Liu, portfolio manager at Tribeca Investment Partners, share that view?
"I think it is 50-50 whether it is a 50 or a 75-basis point increase," she told ABC News.
"It is in the best interest of the economy to slow it down quickly because when inflation picks we can move on to the eventual recovery, so it will be quite aggressive."
By Jessica Riga
Why are investors so worried about rising interest rates and inflation in the US?
"[Investors] are very worried about the sharp rate or how quickly it will be on the consumer as well as the eventual impact on corporate profit earnings outlook," Jun Bei Liu, the portfolio manager at Tribeca Investment Partners, told ABC News.
"That is why the market started pricing in a more recession risk for the US market because interest rates are up a lot faster than we expected.
"This has been translated to Australia even though our earnings growth or inflation numbers are way behind what is experienced in the US. At this point, really it is investors not distinguishing both, really just selling any sector that will potentially be exposed to the eventual recession at risk."
By Jessica Riga
What stocks are taking the most pain locally?
"Locally, we're seeing a lot of pain across the tech sector, as we have seen the Nasdaq was really down significantly and the last couple of days," Jun Bei Liu, the portfolio manager at Tribeca Investment Partners, told ABC News.
"Probably one of the biggest falls is across the Fintech base. We are seeing it down over 18% in some places. There was a big sell-off.
"These companies are trading on a very high earnings valuations, so they definitely have worn the brunt of the seller."
By Jessica Riga
Bitcoin and other cryptocurrencies plummet due to market conditions
The price of Bitcoin and other cryptocurrencies has plummeted after a major lender stopped withdrawals from its platform — citing extreme market conditions.
It's the latest high-profile collapse of a pillar of the cryptocurrency industry, which has seen tens of billions of dollars of assets erased.
Bitcoin is down more than 16 per cent in the past day, and Ethereum has dropped roughly 17 per cent.
Investors have been selling riskier assets like digital currencies and tech stocks, as the US Federal Reserve raises interest rates to fight inflation.
