Australian shares dip on Mideast tension, rising yields

Every sector of the ASX was down by at least one per cent at midday.

The local share market has suffered losses across the board this morning, weighed by surging bond yields and the prospect of the conflict in the Middle East escalating further.

At noon AEST on Tuesday, the benchmark S&P/ASX200 index was down 121.2 points, or 1.56 per cent, to a one-month low of 7,631.3, while the broader All Ordinaries had fallen 125 points, or 1.56 per cent, to 7,884.4.

In Israel, Prime Minister Benjamin Netanyahu was reconvening his war cabinet and the country’s top general said Israel would retaliate after Iran launched a massive missile and drone barrage at Israel over the weekend, risking a further escalation in the conflict.

“This launch of so many missiles, cruise missiles, and drones into the territory of the state of Israel will be met with a response,” IDF chief of staff Lt. Gen. Herzi Halevi told reporters.

In the United States, expectations the Federal Reserve will enact a mid-year interest rate cut fell after the Commerce Department reported retail sales figures for March that were far better than expected.

Turnover was up 0.7 per cent, compared to consensus forecasts of 0.3 per cent, adding to recent data indicating that the world’s biggest economy is still strong and doesn’t need to be propped up by rate cuts.

“The stronger economic activity remains, the slower inflation declines and the later the Fed responds with rate cuts,” said Kathy Bostjancic, chief economist at Nationwide.

“The lack of moderation in consumer spending and inflation … could push off rate reductions to next year.”

US 10-year bond yields rose to their highest level since November, as did the US dollar against a basket of other currencies, while the S&P500 dropped 1.2 per cent to a six-week low.

Every sector of the ASX was down by at least one per cent at midday, with property and consumer discretionary shares falling by slightly more than two per cent.

Just 10 of the 200 companies in the ASX200 were in the green at midday, with Star Entertainment Group the biggest loser, falling 10.8 per cent to a fresh all-time of of 43.25c on a broker downgrade and more damaging allegations at at NSW inquiry on its suitability to hold a casino license.

All of the Big Four banks were deep in the red, with Westpac falling 2.1 per cent, ANZ down 2.0 per cent, CBA retreating 1.9 per cent and NAB dropping 1.7 per cent.

The heavyweight mining sector was down 1.7 per cent, with Rio Tinto down 2.4 per cent and BHP and Fortescue both down 1.8 per cent.

Tuesday will be the fourth straight day of losses for the ASX and could rival a 1.8 per cent drop on March 11 for its worst daily performance so far in 2024.

The Australian dollar had fallen to a five-month low against its surging US counterpart, buying 64.13 US cents, from 64.87 US cents at Monday’s ASX close.