The Australian share market has plunged to a new eight-month low in the wake of inflation jumping more than forecast over the last few months of 2021, raising the prospect of sooner-than-expected interest rate rises.
The market opened lower, despite a late rally on Wall Street following a night of wild swings that saw the Nasdaq fall nearly 5 per cent at one point.
The losses on the ASX deepened after new figures showed consumer prices jumped 1.3 per cent over the December quarter.
At its low point, the local market fell 3 per cent as US futures fell, indicating there would be a drop on Wall Street overnight as the Federal Reserve commenced a two-day meeting.
By the close, the All Ordinaries ended down 2.6 per cent to 7,248, wiping about $63 billion off its market value.
So far it has lost $176 billion for the month in a rocky start to 2022.
The ASX 200 index lost 2.5 per cent to 6,962, falling below the key 7,000-point level for the first time since May 2021.
Just nine stocks rose on the ASX 200.
All sectors were in the red, with oil stocks, technology firms, financial stocks, real estate firms and miners the worst hit.
The inflation figures will put pressure on the Reserve Bank to raise interest rates this year and to speed up the pull back of coronavirus stimulus.
The Commonwealth Bank is the latest bank to predict that the RBA will raise interest rates in August and end its pandemic-era bond-buying program at its meeting next week.
The big banks plummeted, with ANZ losing 3.6 per cent and National Australia Bank down 2.9 per cent.
Higher interest rates increase the cost of borrowing, although it also means higher profits for banks.
The biggest losers on the ASX 200 were lithium miner Liontown Resources (-9.9pc), Chalice Mining (-9.8pc) and online bookmaker Pointsbet (-8.3pc).
Among the few rising stocks on the ASX 200 were technology firm Codan (+16.9pc) on a profit upgrade, A2 Milk (+7.1pc) and safety application firm Life 360 (+3.1pc).
The Australian dollar jumped to 71.74 US cents when the inflation figures came out, but fell back to 71.39 US cents at 4:50pm AEDT.
Omicron saps business confidence
National Australia Bank said its business confidence index saw the third biggest fall on record in December amid the spread of the Omicron COVID-19 variant.
It fell by 24.5 points over the month to -12.4 points, its lowest reading in more than 18 months.
Confidence fell across the country, with New South Wales and Victoria seeing the biggest declines.
Sentiment fell in all industries except mining.
"The confidence index fell below the level recorded at the beginning of the Delta outbreak, showing how concerned businesses are about the current virus wave."
Business conditions also weakened, but remained positive.
Employment dropped as firms faced growing worker shortages, but profitability rose.
Price pressures also weighed on companies, with employers reporting price growth for wages and supplies near record levels.
The survey of almost 400 firms was carried out over the first two weeks of January.
Zip in takeover talks with Sezzle
Zip is in discussions with fellow buy now, pay later company Sezzle over a "potential acquisition."
Zip said the talks with Sezzle were preliminary in nature and there was no certainty that a deal would occur.
"The Zip board remains committed to ensuring any transaction delivers value to shareholders and will always be disciplined in its assessment of potential opportunities."
Sezzle also confirmed it was in talks with Zip.
It said no definitive agreement had been reached in relation to any transaction.
Zip shares lost their gains and closed down 2.1 per cent to $3.21.
Sezzle shares rose by more than one fifth at their height.
They closed up 9.8 per cent to $2.35.
Zip has been expanding amid rapid consolidation in the BNPL sector.
Payment giant Block bought Afterpay for nearly $40 billion, in one of Australia's biggest takeovers.
Myer sales boost
Retailer Myer said the Omicron coronavirus variant had affected trading since Christmas.
But sales for the five months to January 1 rose 12.3 per cent compared to the same time last year.
Online sales rose by more than half.
Myer shares rose 6.8 per cent to $0.40.
Rio Tinto moves ahead with Oyu Tolgoi
Rio Tinto said it had reached an agreement with the Mongolian government and Canadian miner Turquoise Hill Resources over the beginning of underground mining at the Oyu Tolgoi gold and copper mine in Mongolia.
The move ends a long-running dispute between the government and Rio over the nearly $US7 billion ($9.7 billion) expansion project.
The mine is partly owned by the Mongolian government and Turquoise Hill, which is controlled by Rio Tinto.
Rio said the Mongolian parliament had approved a resolution that resolved outstanding issues between Rio and the government.
As part of the deal, Turquoise Hill will waive $US2.4 billion ($3.4 billion) in debt owed to it by the Mongolian government.
Last week, Serbia rejected Rio's planned lithium mine in the country amid anger over Australia's deportation of Serbian tennis star Novak Djokovic.
Rio Tinto shares lost 0.8 per cent.
Fortescue Metals said shipments of iron ore rose 2 per cent over the December quarter, but it said worker shortages and the squeeze in global supply chains were weighing on its operations.
FMG shares fell 5 per cent.
Rivals BHP and Rio Tinto have also warned of COVID-19 related disruption amid a surge in Omicron cases.
Wall Street comes back from sell-off
US stocks ended higher after an earlier steep sell-off as investors faced higher US interest rates, growing geopolitical tension and persistent headwinds from the pandemic.
The major US stock indexes bounced back in the last hour of trade, after a night of wild swings, as bargain hunting investors moved in.
During the session, the S&P 500 neared a correction, a 10 per cent drop from its record closing high on January 3.
Last week, the S&P 500 and the Nasdaq suffered their largest weekly percentage plunges since March 2020, when shutdowns to contain the pandemic led to a US recession.
However, after a night of big falls, the Dow Jones index rebounded late to close 0.3 per cent higher at 34,365, the S&P 500 also put on 0.3 per cent to 4,410, and the Nasdaq Composite increased 0.6 per cent to 13,855.
At one point during the session, the Dow Jones index fell 1,000 points, while the Nasdaq lost nearly 5 per cent of its value.
The ASX SPI 200 index was down 2 per cent to 6,909 at 7:30am AEDT, indicating a steep fall on the local share market.
By 8:50am AEDT, it had pared its losses to indicate a 1.3 per cent fall, indicating that the local session may not be so bad.
The Australian dollar fell 0.6 per cent to 71.38 US cents.
Tim Ghriskey from Ingalls & Snyder in New York said fear was driving the market sell-off.
"It's a continuation of the same issues — uncertainty about the Fed, and the issue with Ukraine."
The US Federal Reserve begins its two day meeting tonight and investors will look for clues on the central bank's timeline for raising key interest rates to combat inflation.
In a sign that geopolitical tensions are heating up, NATO announced it was putting forces on stand-by to prepare for a potential Russian invasion of Ukraine.
The threat of potential conflict in that region saw Treasury yields dip, pausing their recent upward climb, which has pressured stocks in recent months.
Meanwhile, a report from IHS Markit indicated that surging infections of the Omicron COVID variant have hurt business activity in the United States.
US authorities announced they were suing Alphabet, accusing it of deceptive location practices by its Google search engine.
The company's shares fell more than 2 per cent.
Electric car maker Tesla fell more than 5 per cent.
Kohl's Corp surged by one third after Reuters reported private equity firm Sycamore Partners was preparing to make a bid for the department store chain days after a consortium backed by activist investment firm Starboard Value proposed a buyout.
Bitcoin, crypto slump
Bitcoin fell to its lowest level in six months overnight as the cryptocurrency continued to get caught up in the market sell-off.
It fell below $US33,000 to $32,975.76, according to Refinitiv, its lowest point since July.
At 9am AEDT, it had bounced back 4.2 per cent to $US36,861.
Edward Moya, senior market analyst at OANDA, said the cryptocurrency could fall further.
"This is a key moment for Bitcoin and, if panic selling returns on Wall Street, the $30,000 level might not prove very supportive."
European market rout
In London, the FTSE 100 index slumped 2.6 per cent to 7,297, the DAX in Germany lost 3.8 per cent to 15,011, and the CAC 40 in Paris fell 4 per cent to 6,788.
Oil prices declined on the rising political tensions.
Brent crude fell 1.5 per cent to $US86.56 a barrel.
Spot gold rose 0.3 per cent to $US1,838.58 an ounce.
