The Australian share market has gained after three days of losses, despite the Dow Jones index entering a bear market overnight amid investor fears that steep interest rises could trigger a global recession.
Worries were heightened after the British pound fell to its lowest mark on record against the greenback, with investors concerned about how the UK government will finance a plan to cut taxes.
The Australian share market rose for the first time in four days, helped by higher iron ore prices, although it came off its early highs.
The ASX 200 index increased 0.4 per cent to 6,496, while the All Ordinaries index put on 0.4 per cent as well to 6,697.
Four out of the 11 sectors ended higher on the ASX 200, with the increases led by big miners and energy stocks, as oil prices rose during the day.
BHP (+2.8 per cent), Rio Tinto (+3 per cent) and Fortescue Metals (+5.5 per cent) made strong gains.
Among the sectors losing ground were real estate, utilities, technology and financial stocks.
The market turmoil saw the local market fall to a three-month low yesterday.
The ASX 200 is down 7 per cent for the month, and nearly 13 per cent since the start of the year.
Australian dollar edges higher
The Australian dollar slid more than 1 per cent overnight to 64.38 US cents, the lowest since May 2020, as the greenback surged thanks to higher interest rates and the global market turmoil.
ANZ thinks the US central bank will raise official interest rates to 5 per cent next year to curb inflation.
At 4:30pm AEST, the Australian dollar had regained some ground to around 65.07 US cents as the greenback took a breather.
The local currency is buying around 60.25 pence
Market movers
ASX-listed shares of Virgin Money (-1.3 per cent) fell after it was among UK banks temporarily withdrawing their mortgage products for new customers because of the volatility of the pound.
The best performers on the ASX 200 were technology firm Brainchip Holdings (+7.2 per cent), coal miner Whitehaven Coal (6.8 per cent), and data centre operator Megaport (+6.7 per cent).
The worst performers on the ASX 200 were lithium explorer Core Lithium (-5.6 per cent), Fisher & Paykel Healthcare (-4.8 per cent) and private hospital operator Ramsay Healthcare (-3.5 per cent).
Yesterday, a consortium led by private equity group KKR withdrew a $20 billion takeover bid for Ramsay.
MetalsGrove Mining more than doubled its price to $0.23 after a lithium discovery in Western Australia.
Star promises clean up
Casino operator Star Entertainment has accepted the findings of an inquiry by the NSW gaming regulator that the company was unfit to hold a casino licence in Sydney.
However, Star said it should be allowed to keep operating under "strict supervision" because it has developed a remediation plan to address allegations of money laundering, criminal activity and fraud at its Sydney casino.
Star shares rose 1.1 per cent to $2.66.
Oil and gas producer Santos (1 per cent) received a $US1.4 billion ($2.2 billion) offer from Papua New Guinea's state-owned Kumul Petroleum for a 5 per cent stake in its PNG liquefied natural gas project.
Asian markets were subdued with the Nikkei 225 index in Japan up 0.5 per cent, and the Hang Seng in Hong Kong reversing an earlier loss.
OECD cuts forecasts on Ukraine war
The Organisation for Economic Cooperation and Development said the global economy had lost momentum in the wake of Russia's invasion of Ukraine, which was dragging down growth and putting additional pressure on inflation around the world.
Its latest Interim Economic Outlook predicted the global economy would expand by 3 per cent this year, before slowing further to 2.2 per cent in 2023, cutting its previous forecast.
Australia's economic forecast was also reduced with the OECD forecasting that the economy would expand by 4.1 per cent in 2022, but by just 2 per cent next year, avoiding a recession.
"Japan, Korea and Australia have somewhat stronger growth momentum currently than Europe and the United States, but that is projected to wane over the coming quarters, in part due to softer external demand," the report said.
The OECD lowered its forecasts in virtually all the countries it represents, which includes most of the world's major economies, amid soaring energy costs in Europe and COVID-19 outbreaks.
The US and European economies were set to slow, "with risks of deeper declines in several European economies during the winter months," the report said.
It warned the outlook could be even worse with the possibility of further food and energy price spikes, which could push many people into poverty.
The OECD said its new predictions were well below the pace of economic growth predicted before the war and represented about $US2.8 trillion ($4.3 trillion) in lost global production in 2023.
It said growth in China had also been hit and was expected to drop to a projected 3.2 per cent in 2022, the lowest growth rate since the 1970s, aside from the sharp contraction caused by the coronavirus pandemic in 2020.
Dow in bear market
Fears the UK's plan to boost its economy would fuel inflation and push interest rates higher saw US stocks sold off for the fifth day in a row.
The Dow Jones Industrial Average fell into a bear market, down 20.5 per cent from its record close on January 4.
A bear market sees prolonged price declines, where shares fall 20 per cent or more from their peak.
The Dow Jones Industrial Average fell 1.1 per cent to 29,261, the Nasdaq fell 0.6 per cent to 10.803, and the S&P 500 index lost 1 per cent to 3,655.
The S&P 500 index ended at its lowest close for the year. It entered a bear market in June.
The Nasdaq is also in a bear market.
Real estate and energy stocks lead the losses on the S&P index.
Casino firms rose after reports that Macau will loosen travel restrictions in November.
Despite the global market turmoil, US Federal Reserve officials said their priority remained controlling inflation in North America.
Yields on US government bonds hit new highs on concerns that central banks will keep raising interest rates to curb high inflation.
Returns on 2 year Treasury bonds rose to 4.32 per cent, the highest since 2007.
Last week, the Federal Reserve raised interest rates by another 0.75 per cent to a range of 3 per cent to 3.25 per cent.
US rates were near zero at the start of the year.
US policymakers are using steep interest rate rises to make borrowing more expensive and dampen spending, with inflation in North America at around a 40 year high.
Pound hits record low
Investor confidence was shaken by dramatic moves in the foreign exchange market as the British pound hit a record low yesterday on worries about the new UK government's tax cut plan and how it would be paid for.
British bond prices collapsed as investors worry about how the government will pay for its financial plans.
Five-year government bond prices saw their joint biggest daily fall since at least 1991, matching Friday's record plunge.
The pound fell as much as 5 per cent against the greenback to a record low of $US1.0327 in Asian trade, it pared most of its losses in European trade on hopes of an emergency rate rise by the Bank of England.
It closed at $US1.069 overnight, falling from $US1.082 after the Bank of England poured cold water on plans for an emergency rate hike.
UK finance minister Kwasi Kwarteng sent sterling and government bonds into freefall on Friday after delivering a mini budget by funding tax cuts with huge increases in government borrowing.
He issued a statement before the UK market closed, saying he would set out medium term debt cutting plans in late November, along with forecasts from the independent Office for Budget Responsibility on the full scale of government borrowing.
The Bank of England said it would not hesitate to raise interest rates and said it was monitoring markets "very closely".
But it dampened expectations of an emergency rate increase by saying its Monetary Policy Committee "will make an a full assessment at its next scheduled meeting... and act accordingly."
"The bank is monitoring developments in financial markets very closely in light of the significant repricing of financial assets," Bank of England governor Andrew Bailey said.
"The MPC (Monetary Policy Committee) will not hesitate to change interest rates by as much as need to return inflation to the 2 per cent target sustainable in the medium term."
Last week, it raised interest rates from 1.75 per cent to 2.25 per cent.
ANZ economic strategists Brian Martin and Mahjabeen Zaman said the plunge of sterling underlined the need for market confidence in the UK Government's policies.
"The volatility...serves as a salutary reminder of the need to deliver credible policy, particularly in the current climate of high inflation and asset price weakness," they said.
"An inter-meeting Bank of England rate hike could be seen as a panic measure and make volatility worse."
The market turmoil saw UK mortgage lenders temporarily withdraw and reprice mortgage products for new customers.
In London, the FTSE 100 index finished steady, up 0.03 per cent to 7,021, the DAX in Germany fell 0.5 per cent to 12,228, and the CAC 40 in Paris fell 0.2 per cent to 5,769.
Oil prices fell $US2 and finished at a nine-month low as the greenback surged.
Brent crude lost 2.6 per cent to $US83.94, while West Texas crude fell 3 per cent to $US76.34 a barrel.
While spot gold traded around the lowest in two and a half years on fears of rising interest rates.
At 7:30am AEST, it was down 1.3 per cent to $US1621.20 an ounce.
ABC/Reuters
