The Australian share market has tumbled more than 1 per cent amid another fall on Wall Street, as investors worry about another supersized interest rate rise in the US, and as the World Bank warned of a global recession.
The market fell as much as 1.5 per cent in afternoon trade after the Reserve Bank governor, Dr Philip Lowe, told a parliamentary committee that more interest rate increases are needed to lower inflation in Australia, and oil prices dropped overnight.
By the close, the All Ordinaries index lost 1.4 per cent to 6,983, while the ASX 200 index fell 1.4 per cent as well to 6,747, both closing below the key 7,000 points level.
All but one sector ended in the red with energy stocks and miners the biggest drag on the market.
Gold miners also fell because of a fall in the price of the precious metal to $US1659.11 an ounce today.
National Australia Bank (+0.5 per cent) was the only big bank to rise.
Toll road operator Atlas Arteria (-9.7 pc) was the biggest loser in the ASX 200, while casino group Star Entertainment (+5.1 per cent) performed the best.
Atlas Arteria slumped because a big investor is unhappy with its plans to a take a 67 per cent stake in a Chicago toll road.
It has raised $2.5 billion from institutional investors to fund the purchase.
Woodside Energy (-2.9 per cent) and several Japanese firms said they would carry further studies to establish an ammonia supply chain from Australia to Japan to help it cut carbon emissions from shipping and power plants.
The Australian dollar dropped below 67 US cents to a low of 66.85 US cents.
At 4:40pm AEST, the local currency was buying 66.93 US cents.
The local currency has fallen more than 2 US cents this week on the higher greenback.
Chinese economy
New data showed China's economy was stronger than expected in August, helped by government stimulus, although the property downturn worsened.
Factory production rose 4.2 per cent over the year, retail sales increased by 5.4 per cent, and fixed asset investment rose 5.8 per cent according to the National Bureau of Statistics.
However, Capital Economics China economist Julian Evans-Pritchard said the figures were stronger because the economy bounced back from the impact of the COVID-19 Delta variant a year ago.
"While the current virus wave may have peaked, activity is set to remain weak over the coming months amid the deepening property downturn, softening exports, and recurring COVID-19 disruptions," he said.
Property investment fell nearly 14 per cent over the year to August according to Reuters calculations, and sales also dropped.
The Shanghai Composite index lost 1.5 per cent to 3,152 at 4:10pm AEST after securities fees were asked to further cut service fees by the government.
RBA warns of economic uncertainty
Dr Philip Lowe was addressing the House of Representatives Economics Committee, with his comments coming as the World Bank warned of the risk of a global recession next year because of higher global interest rates.
Dr Lowe said the US, Europe and China were slowing down, and that would affect Australia.
"One important source of uncertainty is the global economy, where the outlook has deteriorated," he said.
"It will be difficult for Australia to stay on that narrow path to a soft landing if there is further material bad news on the global economy."
Dr Lowe said the central bank would do what was necessary to reduce inflation to the RBA's target range of 2 to 3 per cent from the current annual rate of 6.1 per cent.
"In terms of the outlook for interest rates, the Reserve Bank board expects that further increases will be required to bring inflation back to target.
"We are not on a pre-set path, though, especially given the uncertainty," Dr Lowe said.
The RBA has raised rates from 0.1 per cent in May to 2.35 per cent this month, with four out of the five rate rises set at half a percentage point.
But Dr Lowe said next month the RBA would discuss whether a 0.25 percentage point or 0.5 percentage point increase was warranted.
However, both ANZ and National Australia Bank expect the RBA to raise rates by half a percentage point next month to 2.85 per cent.
World Bank warns of recession
The World Bank said the world could be edging towards a global recession as central banks increase interest rates to combat surging inflation.
In a new report, the bank said the world's largest economies, the US, China and the euro area, had been slowing down and even a "moderate hit to the global economy over the next year could tip it into recession".
"Global growth is slowing sharply, with further slowing likely as more countries fall into recession," said World Bank president David Malpass.
The bank said the global economy was in the steepest slowdown following a post-recession recovery since 1970, and consumer confidence had dropped more quickly than in the lead up to previous global recessions.
However, it noted that rate rises by central banks were likely to continue, but that may not be enough to bring inflation down.
It said the global core inflation rate could stay at around 5 per cent in 2023, nearly double the five-year average before the pandemic.
The bank said central banks may need to raise interest rates by an extra 2 percentage points, on top of the average 2 percentage point increase seen in 2021.
However, that could slow global gross domestic product to 0.5 per cent next year, causing a recession.
The International Monetary Fund said this week some countries are expected to slip into recession in 2023.
Wall Street falls again
US stocks resumed their sell-off overnight as new economic data reignited fears of more steep interest rate rises by the US central bank.
It was a volatile trading session as stocks initially rose after US President Joe Biden announced a "tentative deal" with unions to avert a rail strike.
Economic data showed retail sales rebounded in August as consumers bought more cars and ate out amid lower gasoline prices.
But revised numbers showed that sales fell in July.
And the US Labor Department said initial claims for state unemployment benefits fell last week to the lowest level since the end of May.
Investors are expecting a large rate hike by the Federal Reserve next week, possibly as high as 1 percentage point.
"The market remains choppy knowing that there's a Fed meeting next week," said Quincy Krosby, chief global strategist at LPL Financial.
"Even though participants agree it'll be a 75-basis point rate hike, it's what the statement adds to previous commentary and what [Chairman Jerome] Powell says in his press conference."
The Dow Jones Industrial Average closed at its lowest level in two months.
Banks and healthcare stocks made gains, but technology and energy stocks led the falls.
The Dow fell 0.6 per cent to 30,962, the S&P 500 lost 1.1 per cent to 3,901, and the Nasdaq Composite fell 1.4 per cent to 11,552.
Oil prices slumped on the news about the deal with railway workers.
Brent crude oil fell 3.6 per cent to $US90.71 a barrel, while West Texas crude lost nearly 4 per cent to $US85.03 a barrel.
Spot gold fell to its lowest since April 2021 as US Treasury yields and the greenback rose on expectations of a steep US rate hike next week.
European stocks ended mainly lower with oil and technology shares declining the most.
The FTSE 100 index rose 0.1 per cent to 7,282, the DAX in Germany fell 0.6 per cent to 12,956, and the CAC 40 in Paris lost 1 per cent to 4,662.
Kanye splits with Gap
Rapper and fashion designer Kanye West is terminating his partnership with clothing retailer Gap, accusing it of failing to meet its obligations under their contract.
West told CNBC that Gap breached its agreement by not selling the Yeezy Gap-branded products at its retail outlets and failing to open dedicated stores for the brand.
His lawyer said West would make up for lost time by opening Yeezy retail stores.
"Sometimes I would talk to the guys, the leaders, and it would be like I was on mute or something," he told CNBC.
"I'm not going to argue with people who are broker than me about money."
West signed a 10-year deal with Gap in 2020 to create a line of clothing under the Yeezy Gap brand.
The first product, a $US200 ($298,28) blue puffer jacket, did not go on sale for a year.
But it sold out within hours of its launch in June 2021.
Mr West accused Gap of copying a T-shirt he designed and selling it for $US19.99.
Reuters cited a Gap internal memo from Gap Brand president and chief executive Mark Breitbard, saying the company would wind down the partnership with West as the parties were not aligned on how to work together to deliver their vision.
Gap shares fell 3.6 per cent on the news.
ABC/Reuters
