Aussie shares plunge ahead of Federal Reserve meeting

The ASX200 index was 1.08 per cent lower on Wednesday.

The Australian share market has plunged after stronger-than-expected US wage data raised fears of more hawkish commentary from the US Federal Reserve.

At noon AEST on Tuesday, the benchmark S&P/ASX200 index was down 82.9 points, or 1.08 per cent, to 7,581.2, while the broader All Ordinaries had dropped 89.1 points, or 1.12 per cent, to 7,842.9.

Overnight a report known as the Employment Cost Index showed employment costs rose 1.2 per cent last quarter, a higher-than-expected wage gain that will renew concerns about inflation.

“This isn’t going to calm any nerves at the Fed,” Scott Anderson, chief economist at BMO Capital Markets, told CNN.

The Federal Reserve’s rate-setting Open Market Committee could be set to push back on the timing of any rate cuts this year when it finishes its latest two-day meeting early Thursday AEST.

“There’s a consensus that the central bank will harden its language about future policy and guide, even if only implicitly, that the prospects for rate cuts this year are being removed from the equation,” Capital.com analyst Kyle Rodda said.

The CME FedWatch Tool shows the futures markets now expects that a US rate cut won’t occur November – rather than the June cut that many were predicting just a few weeks ago.

At midday every sector was down except consumer staples, which was flat. Tech was the biggest mover, dropping 2.4 per cent as Wisetech Global retreated 4.3 per cent and NextDC fell 3.2 per cent.

Just 15 of the 200 companies in the ASX200 were in the green at noon, with another three names flat.

Goldminers were among the biggest losers, as the precious metal slid to a one-month low of $US2,280 an ounce on the prospect of rates staying high for longer. Northern Star was down 4.7 per cent, Evolution had dropped 4.1 per cent and Emerald Resources was the biggest ASX200 decliner with a 6.9 per cent drop.

Elsewhere in the material sector, BHP fell 1.1 per cent, Fortescue slid 2.3 per cent and Rio Tinto was down 1.4 per cent.

Three of the four big retail banks were lower, with ANZ dropping 0.6 per cent, Westpac down 0.5 per cent and CBA falling 0.8 per cent.

NAB was the outlier, rising 0.4 per cent.

Endeavour Group was down 3.6 per cent to a two-month low of $5.165 after Woolworths sold five per cent of the alcohol retailer’s shares in a $468 million block trade.

Woolworths said it intended to use the proceeds to return capital to shareholders.

Shares in the supermarket group, which will report third-quarter sales results on Thursday, were up 0.7 per cent to $32.13.

The diminishing odds of midyear US rate cuts sent the US dollar to its highest level since November against a basket of other currencies, including the Australian dollar.

The Aussie was at a one-week low against the greenback, buying 64.72 US cents, from 65.23 US cents at Monday’s ASX close.