Why did the Galan Lithium share price drop 7% on Monday?

Volatility and the spectre of rising interest rates could have compressed Galan Lithium's share price on Monday.

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Key points

  • The anxiety in the market was reflected in its volatility on Monday
  • The ASX 200, as well as the materials sector index, went through some wild swings but finished laying largely flat
  • These uncertain price movements will likely continue throughout October and beyond as the Federal Reserve is due to meet early next month, which could see interest rates being hiked further

The Galan Lithium Ltd (ASX: GLN) share price lost 7.11% of its value today amid a volatile and bumpy ride for the market on Monday. Shares in the mining development company closed for $1.11.

Many of Galan Lithium's peers also lost ground today. Here's a snapshot of how some of its fellow ASX lithium shares performed:

  • Genesis Minerals Ltd (ASX: GMD) lost 4.5%
  • GR Engineering Services Ltd (ASX: GNG) lost 0.48%
  • Global Lithium Resources Ltd (ASX: GL1) lost 6.82%

There have been no developments to report on this afternoon to make sense of why these ASX lithium shares were sold off.

However, we can gather some clues on what happened from the broader market. Let's investigate.

ASX 200 and the materials sector swing wildly

The S&P/ASX 200 Materials Index (ASX: XMJ), of which Galan Lithium is a part, finished down 0.24% for the day.

The index jumped to a high of 15,408 within the first 10 minutes of the market opening. It then made a low of 15,122 shortly after midday, which is a 1.8% price change in around two hours.

This closely mirrored the behaviour of the S&P/ASX 200 Index (ASX: XJO), which also ended up almost laying flat after a day of volatile movements with a similar loss of 0.27%.

We could expect this kind of volatility to persist throughout October and beyond as the next United States Federal Reserve meetings will be held in early next month. At least temporarily, the stock market's fate is hinged on whether the Fed will increase rates further. The consensus is that this is a likely scenario, as the Fed is expected to raise interest rates by 1.25% before the year's end, as reported by Bankrate.

Galan Lithium share price snapshot

The Galan Lithium share price is down 43% year to date. That's significantly greater than the ASX 200 over the same period, which has lost 13%.

The company's market capitalisation is around $364 million.

Motley Fool contributor Matthew Farley has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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