Key facts
- Australian stocks closed at a more than two-month low on Friday.
- The benchmark S&P/ASX 200 index fell 0.9% to 8,741.20 points.
- Miners led the decline, falling 3.7%, amid concerns over commodity prices and inflation.
- BHP shares dropped 4.1%, and Rio Tinto shares fell 3.5%.
- Financial stocks advanced 1.1%, limiting losses.
- Australian government bond yields rose above 5%.
Australian stocks closed at their lowest level in over two months on Friday, dragged down by a significant drop in mining shares due to falling commodity prices and broader investor concerns about inflation and potential further interest rate hikes.
The benchmark S&P/ASX 200 index fell 0.9% to 8,741.20 points, marking its lowest closing level since July 2. For the week, the index declined 2.1%, its sharpest weekly fall since mid-March.
Global investors adopted a risk-off stance, retreating to cash and defensive assets amid fears that elevated oil prices and persistent inflation, exacerbated by the Middle East conflict, could lead central banks to tighten monetary policy further. "It's no surprise to see the market in a steep 'risk-off' mode with investors retreating to cash and defensive assets until we see some stability in the macroeconomic outlook," said Luke Winchester, portfolio manager at Merewether Capital.
Heavyweight miners experienced their steepest decline since June 19, with the sector falling 3.7%. This was influenced by a drop in copper prices, as the White House has not yet decided on refined copper tariffs due to concerns about increased manufacturing costs. Major miner BHP slumped 4.1%, and Rio Tinto shed 3.5%. Lithium miners Liontown and PLS also saw significant drops, falling 8.6% and 7.4%, respectively.
While oil prices eased slightly, they were still set for a weekly gain, remaining above $100 a barrel due to fears of prolonged supply disruptions. Over the past week, hawkish signals from Reserve Bank of Australia governors, combined with higher energy prices, have increased expectations of further rate hikes, with markets currently pricing in 32 basis points of hikes by November and 39 basis points for December.
Australian government bond yields across both short-term and long-term maturities surpassed the 5% mark, reaching their highest levels since mid-2011 amid a global bond selloff.
Financial stocks provided some support, advancing 1.1% and achieving their best session in nearly two weeks after three consecutive days of losses.
In New Zealand, the benchmark S&P/NZX 50 index fell 1% to 13,580.33 points, its lowest close since late June. Investors are now awaiting New Zealand's June-quarter GDP data, scheduled for release next week.