The S&P/ASX 200 closed 0.8 per cent lower at 6781.4. The index has been stuck between 6500 and 7000 points for two-months. The technology sector fell 2.7 per cent and was down 8 per cent for the year after a stellar performance in 2020.
BHP shares declined 3.1 per cent to $48.86, but were still 12 per cent higher than three weeks ago. Rio Tinto declined 2.7 per cent to $126.45, but was still $15 higher than the start of the month. Overall the heavyweight mining sector declined 2.7 per cent.
Telstra dropped 3 per cent after going ex-dividend and Afterpay dropped 3 per cent to $134.36. The financial sector dropped 0.4 per cent. Only the consumer staples and utilities sector finished in green with Woolworths up 1 per cent on strong results.
Rising oil prices continue to fuel expectations inflation could be on the move. Wages growth came in at 0.6 per cent, slightly higher than predicted, adding to the inflation argument.
The ASX declined along with major Asian bourse despite Wall Street providing a positive lead after US Federal Reserve chair Jerome Powell said the central bank would continue supporting economic growth and had a strong appetite for inflation.
“He has reassured equity markets that financial conditions will remain very supportive for a while yet,” Nomura Australia investment strategist Andrew Ticehurst said.
“(But) if central banks are just going to stay very cautious and keep rates very low, then the risk is that this spills into higher asset prices, like house prices,″ he added.
New Zealand’s central bank on Wednesday said it too would remain supportive, but sounded very uncertain, Mr Ticehurst added. Both Australia and New Zealand have strengthening currencies, which makes economic recovery harder.
Betashares ETFs senior economist David Bassanese said two factors were behind the Australian dollar’s rise, but essentially the Australian dollar was benefitting from the post-COVID reflation trade.
“The US dollar is still on the nose globally,″ Mr Bassanese said.
“It has been weakening since the world and markets started to recover from COVID. The second thing is Iron ore prices have been incredibly strong”
While he does not think the Aussie will get close to parity, like it did from 2011 to 2013, it would all depend on the US dollar value and iron ore prices.
“Investors globally are looking for market exposure outside the US, outside the big FAAANG stocks, and that has been putting pressure on the US dollar and benefitting the Aussie.”
Hong Kong’s market dropped sharply after the government’s annual budget revealed a rise in stamp duty on stock trading. China’s stock market has declined this week after a five day Lunar New Year holiday.