Michele Bullock’s first decision as governor to grant borrowers rates reprieve failed to claw back a broad sell-off on Tuesday morning when the Australian share market plunged to its lowest level in six months following a rout in US Treasuries overnight.
Yields on five-year to 30-year US Treasuries rose a further 10 basis points overnight following more hawkish messaging from the US Federal Reserve which sent the rate on the 10-year benchmark to 4.7 per cent, a level not witnessed since 2007.
At the closing bell, the S & P/ASX200 dropped 1.3 per cent or 89.8 points over trading to close at 6,943.4 points, while the All Ordinaries fared just as poorly, falling 1.3 per cent or 94.5 points, to 7,140 points.
Ten of 11 sectors on the local benchmark finished in the red, with health care the sole industry to finish in positive territory.
Energy stocks were the worst performing, dropping 3.7 per cent, as oil prices further retreated from near-record highs. Brent Crude now sits at $88 a barrel, dropping 0.9 per cent overnight.
Sector heavyweight Woodside dropped 3.7 per cent to $34.90, Santos fell 4.3 per cent to $7.53, while Beach Energy slipped even further to lose 5.5 per cent bringing stocks to $1.54 a share.
Weakening iron ore prices also saw major mining stocks fall with BHP losing 1.7 per cent to $43.84, Rio Tinto down 1.8 per cent to $112.80, and Fortescue dipped 1.6 per cent to $20.73.
The Aussie also continued its sell-off overnight and now sits at its lowest level in 11 months to $US 63.15c.
In company news, Computershare’s announcement that it would sell its US mortgage service operations for $US720 million ($A1.13bn) failed to budge its share price which rose just 0.04 per cent to $25.82 a share.
Chief market analyst at KCM Trade, Tim Waterer said investors remained rattled by the prospect of interest rates staying high for a prolonged period around the globe.
“The sight of the US 10-year Treasury yields trading around 4.7 per cent, and perhaps going higher, has equity markets trading anxiously at the moment,” he said.
Mr Waterer added that despite the RBA choosing to hold rates steady, elevated oil prices would factor into the central bank’s thinking on future directions.
“If high oil prices are dragging on for months rather than weeks, then I think that's when you’re starting to see supply chain impacts.”
Even if oil prices were consistently below their current levels, Mr Waterer said the RBA would be forced to hike due to other inflationary pressures