Miners, tech companies sink ASX as China’s struggles rattle investors

Information technology and mining companies dragged the Australian sharemarket down on Wednesday following a negative lead from Wall Street and a concerning global outlook from the world’s second-largest economy.

The S&P/ASX 200 was down 93.3 points, or 1.3 per cent, to 7211.7 at about 12.15pm AEST as all sectors except real estate investment trusts (REITs) traded in the red.

Wall Street is lower across the board.Credit: AP

The Australian dollar, which tends to perform better when investors are optimistic about the global economy and the world’s demand for the country’s resources, continued to fall. It was fetching 64.49 US cents at about 10.30am AEST.

REITs (up 0.2 per cent) was the only sector in the green. Mirvac added 4.2 per cent despite warning its earnings would fall further in its most recent full-year report, Vicinity Centres climbed 3.1 per cent despite posting lower net profit compared to last financial year and Stockland also gained, lifting 2.2 per cent.

Communication services companies (down 0.3 per cent) were also relatively resilient, with REA Group (up 0.7 per cent) among the biggest large-cap advancers.

EBOS Group (up 0.9 per cent) bolstered the healthcare sector (down 0.3 per cent) along with Resmed (up 0.3 per cent) as investors stayed with defensive stocks.

Lithium companies bucked the trend among mining stocks with Liontown gaining 0.7 per cent and Pilbara Minerals adding 0.3 per cent amid a 2 per cent fall in the mining sector more broadly.

Iron ore heavyweights BHP (down 2.6 per cent), Fortescue (down 2.2 per cent) and Rio Tinto (down 2.1 per cent) all declined despite a 0.6 per cent increase in iron ore prices overnight.

Meanwhile, the country’s biggest bank, CBA, shed 3.4 per cent amid a 1.7 per cent decline in the broader financials sector. All four big banks traded lower including NAB (down 0.9 per cent), Westpac (down 1.1 per cent) and ANZ (down 1 per cent).

Information technology (down 3 per cent) was the weakest sector on the local bourse as WiseTech dropped 3.8 per cent, NEXTDC lost 2.8 per cent and TechnologyOne fell 2.8 per cent.

A sharp drop for Wall Street capped a day of declines around the world after discouraging data on China raised worries about the global economy.

The S&P 500 slumped 1.2 per cent for one of its worst drops this year after data showed a deepening slump for the world’s second-largest economy. The Dow Jones tumbled 361 points, or 1 per cent, and the Nasdaq Composite sank 1.1 per cent.

Coming into this year, the expectation was that China’s economy would grow enough after the government removed anti-COVID restrictions to prop up a global economy weakened by high inflation. But China’s recovery has faltered so much that it unexpectedly cut a key interest rate on Tuesday and skipped publishing a report on how many of its younger workers are unemployed.

Worries about the knock-on effects for the rest of the global economy are weighing on Wall Street, where stocks have already been retrenching in August. The pullback follows a gangbusters first seven months of the year that critics called overdone.

China’s economy continues to falter.Credit: Bloomberg

In the US, the economy has remained more resilient than expected despite higher interest rates. A report on Tuesday showed growth for sales at US retailers accelerated by more in July than economists expected.

The strong retail sales report raises hopes that the US economy can keep growing and avoid a long-predicted recession. But on the downside for markets, it could also raise the Federal Reserve’s resolve to keep interest rates high in order to fully grind down inflation.

The Fed has already hiked its key interest rate to the highest level in more than two decades. High rates work by bluntly dragging on the entire economy and hurting prices for investments.

A faltering Chinese economy could mean less demand for oil and other commodities.

The price for a barrel of US crude oil dropped $US1.52 to $US80.99. Prices also fell for Brent crude, the international standard, and for copper.

The declines meant stocks of energy producers were among the biggest losers in the S&P 500. Exxon Mobil’s 2.6 per cent drop was one of the heavier weights on the index.

Banks also sank, continuing a rocky run since the high-profile failures of several during the spring that were caused in part by high interest rates.

In stock markets abroad, indexes slumped in Europe after falling 1 per cent in Hong Kong and 0.1 per cent in Shanghai.

Pressures are appearing worldwide. Also on Tuesday, Russia’s central bank raised its main lending rate in an emergency move to strengthen the rouble after the currency reached its lowest value since early in the war with Ukraine. In the UK, data showed wages for workers are growing at a strong pace, which threatens to add upward pressure on its already high inflation.

With AP

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