The ASX stepped back from record highs on Wednesday as traders assumed a defensive position ahead of a US Federal Reserve meeting early Thursday morning local time.
Traders were predicting that the stock and bond markets were likely to instantly react to any indication of stimulus measures being wound back.
The benchmark ASX200 opened Wednesday’s session flat before hitting its lowest point in early afternoon. It ended the day 0.7 per cent lower at 7379.3 points.
![The S&P/ASX 200 fell 0.7 per cent on Wednesday.](https://static.ffx.io/images/$width_300%2C$height_150/t_crop_auto/t_sharpen%2Cq_auto%2Cf_auto/dd972a5dc366cbec1ea0eedb3c0e86ae24c3f1f7)
The S&P/ASX 200 fell 0.7 per cent on Wednesday.Shutterstock
Higher-than expected inflation data also sent traders running for cover,along with predictions for hundreds of thousands of job losses in Sydney due to extended lockdowns. The federal government eased concerns by increasing emergency lockdown payments.
Blue chip stocks dragged away points with BHP down 1.7 per cent,South32 down 3 per cent,and Wesfarmers down 1.2 per cent.
The banks were lower with Commonwealth Bank down 1.4 per cent,and buy now,pay later giant Afterpay fell 3.6 per cent as tech stocks were sold off.
Spark Infrastructure gained 5.4 per cent to $2.74 after receiving an improved third bid from KKR and Ontario Teachers Pension Fund.
Real estate stocks out-performed with a 2.4 per cent gain in Vicinity Centres,2.3 per cent gain in Cromwell,and 2 per cent rise in Scentre.
Hong Kong and China’s stock markets stabilised after a multi-day decline that has seen up to 10 per cent of value wiped off in the past week due to a regulatory crackdown.
In the late morning the Australian statistics bureau revealed annual inflation was running at 3.8 per cent,slightly higher than expected.
Head of investments and capital markets at VanEck Australia,Russel Chesler,said the bond market was now predicting an interest rate rise in early 2023.
“We believe that this is still likely provided NSW emerges from lockdown by the end of August and the vaccine program ensures no major lockdowns going forward,” he said.
“While Sydney’s lockdown and Melbourne’s recent restrictions will halt immediate price pressures,this will not take away from longer-term inflationary pressures,which stem from many factors such as rising fuel and iron ore prices,and increasing property prices,” he added.
Despite the weaker afternoon,13 stocks in the ASX200 closed at 12-year highs,including Woolworths getting to $39.73 and BlueScope Steel touching a 13-year high of $24.58.
However,sentiment was muted after weak leads from overseas.
“US markets finished the overnight session lower despite blockbuster US tech results,as buy-the-rumour,sell-the-fact,and some pre-Federal Open Market Committee (FOMC) risk trimming took the wind out of Wall Street’s sails,” OANDA’s senior market analyst for Asia,Jeffrey Halley,said,adding he was not expecting to see any change in policy especially given the spread of the Delta variant.
“Markets appear to be similarly inclined and guarded against the outside chance that Mr (Jerome) Powell and friends may indicate they are starting to think about starting to talk about the possibility that they may start pondering tapering. September’s meeting remains my favourite for that kick-off,but hey,it’s 2021.”