The Australian share market has suffered its biggest drop in more than a week after the chair of the US central bank warned of more rate rises, despite his Australian counterpart hinting a pause in interest rates might be on the cards.

The benchmark S&P/ASX200 index on Wednesday closed down 56.9 points, or 0.77 per cent, to 7,307.8, while the broader All Ordinaries was 58.8 points lower, or 0.78 per cent, at 7,503.9.

The Australian dollar tumbled to its lowest level since November after hawkish commentary from US central bank chief Jerome Powell overnight contrasted with RBA governor Philip Lowe’s dovish turn.

The Federal Reserve chairman warned more interest rates will be needed to contain inflation and signalled a possible return to 50 basis point rate hikes after recently raising rates by only 25bp.

“The latest economic data have come in stronger than expected, which suggests that the ultimate level of interest rates is likely to be higher than previously anticipated,” Mr Powell told the US Senate.

Wall Street traders flinched at the comments, sending the S&P500 tumbling 1.5 per cent, its worst session in seven weeks.

Meanwhile, Dr Lowe told the Australian Financial Review’s Business Summit in Sydney the RBA board discussed the timing of a potential interest rate pause when it met to lift rates by 0.25 percentage points on Tuesday afternoon.

While the RBA’s recent dovishness might have saved the ASX from even further falls, ultimately the market is going to be determined by developments in the US, City Index analyst Matt Simpson told AAP.

“While the RBA are talking themselves towards a pause, I think it is wishful thinking at the moment,” he said.

“The Fed are the biggest. They run the show.

“If the Fed is going to keep on hiking and go way above the RBA rate, then eventually the RBA may have to follow.”

US and Australian central banks talking at cross purposes on rates created a perfect storm for an Australian dollar sell-off.

Mr Simpson predicts it could get as low as 65 US cents by next week if household spending and employment data come in weaker than expected, signalling the RBA will continue down its dovish path.

All but two of the ASX’s 11 official sectors finished lower, with energy stocks down 4.2 per cent.

Oil and gas producer Woodside sank 7.2 per cent to $34.90 after announcing a board shake-up, appointing former TotalEnergies senior executive Arnaud Breuillac as a non-executive director.

Lead analyst at the Australasian Centre for Corporate Responsibility and former Woodside insider Alex Hillman criticised the appointment, accusing the board of ignoring its responsibilities to decarbonisation.

“Woodside remains stubbornly rusted on to its underwhelming 2021 climate plan,” he said.

Materials shares were also down by more than 1.0 per cent, with Australia’s biggest company BHP dipping 0.6 per cent to $47.63.

Fortescue Metals fell 1.4 per cent to $22.20 and Rio Tinto slid 0.1 per cent to $124.88.

The big banks were down across the board, with Westpac falling 1.2 per cent to $22.11, NAB 0.9 per cent weaker at $29.45 and ANZ 0.7 per cent lower at $24.33.

CBA shares fell 0.5 per cent to $98.41 after Australia’s biggest bank revealed its Indonesian subsidiary PT bank Commonwealth was hit by a cyber attack, but no Australian customers were affected.

Nuix plummeted 15.2 per cent after the data analytics provider reiterated its rejection of ex-CEO Eddie Sheehy’s claims he was entitled to a stock split.

It was a better day for Qantas, whose shares soared 2.9 per cent to $6.77 as a report by the competition watchdog showed domestic airfares and flight delays both fell in January.

Biotechnology company Mesoblast skyrocketed 14.1 per cent to $1.06 after the US Food and Drug Administration accepted its resubmission for a steroid-refractory treatment drug.

The Australian dollar plunged to a four-month low against its US counterpart, buying 65.91 US cents, from 67.11 US cents at Tuesday’s ASX close.

ON THE ASX:

* The benchmark S&P/ASX200 index finished Wednesday down 56.9 points, or 0.77 per cent, at 7,307.8.

* The broader All Ordinaries dropped 58.8 points, or 0.78 per cent, to 7,503.9.

CURRENCY SNAPSHOT:

One Australian dollar buys:

* 65.91 US cents, from 67.11 US cents at Tuesday’s ASX close

* 90.85 Japanese yen, from 91.27 Japanese yen

* 62.56 Euro cents, from 62.79 Euro cents

* 55.75 British pence, from 55.72 pence

* 108.05 NZ cents, from 108.18 NZ cents.

 

Jacob Shteyman