ASX 200 sinks to 2-month low on US market jitters

Why has the ASX 200 lost so much steam this week? Blame the Americans.

| More on:
Red arrow going down on a stock market table which symbolises a falling share price.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • The ASX 200 is having a shocker this Friday
  • Today's losses put the ASX 200 at a two-month low
  • So what's gone so wrong this week?

Well, it's looking like the S&P/ASX 200 Index (ASX: XJO) and ASX shares are set to end the trading week on a bit of a low note. So far today, the ASX 200 has lost a nasty 1.97%. That pulls the Index down significantly from the 7,311 points it closed at yesterday to the 7,167 points it has gotten down to at the time of writing. 

We see these market losses reflected in most of the ASX 200's most prominent shares. Commonwealth Bank of Australia (ASX: CBA) is faring awfully today, having lost a depressing 2.93% at present at $95.82 a share. The other ASX 200 banks aren't faring much better, with Westpac Banking Corp (ASX: WBC) and ANZ Group Holdings Ltd (ASX: ANZ) both down more than 3%.

The ASX 200's largest constituent, BHP Group Ltd (ASX: BHP) isn't doing much better. BHP shares have presently lost 2.6% of their value and are down to $45.38 a share. With Telstra Group Ltd (ASX: TLS), CSL Limited (ASX: CSL) and Woodside Energy Group Ltd (ASX: WDS) also nursing losses, it's hard to find many ASX 200 shares in the green today.

These nasty market losses have built on the jitters we've seen for most of the week. Since Tuesday's session, the ASX 200 has now slipped by a meaningful 2.8% or so. This has pulled the ASX 200 down significantly, with the Index now at a level we haven't seen for almost exactly two months.

Yes, ASX 200 shares are now at the same level they were at in early January. The market is also down by more than 5% since it reached its 2023 high in early February.

So what's going on here?

Why are ASX 200 shares at a two-month low?

Well, it's fairly obvious the contagion of this market panic has started over in the United States. US markets have also had a tumultuous week. Last night, the S&P 500 Index (SP: .INX), which is the flagship index covering the US markets, tumbled by 1.85%.

Since Monday's trading, the S&P 500 has lost more than 3.2%. So it was always going to be hard for ASX shares to do well with these losses across the Pacific.

It seems this recent weakness in the US markets has stemmed from comments that Federal Reserve chair Jerome Powell made to the US Congress this week. As my Fool colleague Bernd covered earlier this week, Powell said the following to the United States Senate Banking Committee:

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. If the totality of the data were to indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes.

This is exactly the kind of news investors hate. Higher interest rates mean that more money is going to be pulled out of the US economy (and by extension, the global economy) in order to control American inflation. And that is bad news for share markets.

Higher rates also increase the appeal of cash investments like term deposits and savings accounts, which tends to see money moving out of 'risky' assets like shares and into the 'safety' of the bank.

So no wonder Powell's comments spooked US investors, and consequentially, ASX investors.

So it looks like this is why both the ASX and the US have had such a dire end to the trading week. Let's hope the pessimism doesn't last the weekend.

Motley Fool contributor Sebastian Bowen has positions in Telstra Group. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended CSL. The Motley Fool Australia has positions in and has recommended Telstra Group. The Motley Fool Australia has recommended Westpac Banking. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Market News

A man clenches his fists in excitement as gold coins fall from the sky.
Broker Notes

These ASX 200 shares can rise 20% to 50%

Let's see which shares are being tipped to rocket from current levels.

Read more »

The silhouettes of ten people holding hands with their arms raised against the sky, as the sun rises or sets in the background.
Share Gainers

Here are the top 10 ASX 200 shares today

Investors panicked when the latest inflation figures came out today.

Read more »

A man holds his head in his hands, despairing at the bad result he's reading on his computer.
Broker Notes

Why Guzman Y Gomez shares are a sell

Goldman Sachs has given its verdict on the burrito seller.

Read more »

A man pulls a shocked expression with mouth wide open as he holds up his laptop.
Broker Notes

Top brokers name 3 ASX shares to buy today

Here's what brokers are recommending as buys this week.

Read more »

Man drawing an upward line on a bar graph symbolising a rising share price.
Share Gainers

Why Mac Copper, Pro Medicus, Web Travel, and Yancoal shares are pushing higher today

These shares are having a good time on hump day. But why?

Read more »

Frustrated stock trader screaming while looking at mobile phone, symbolising a falling share price.
Share Fallers

Why ALS, Fisher & Paykel Healthcare, IPD, and Predictive Discovery shares are falling today

These shares are having a tough time on hump day. But why?

Read more »

Man looking at his grocery receipt, symbolising inflation.
Share Market News

How are ASX 200 investors responding to the latest Aussie inflation numbers?

The ASX 200 was up 0.2% today before the ABS reported the latest inflation figures.

Read more »

A couple makes silly chip moustache faces and take a selfie on their phone.
Broker Notes

Macquarie sees more upside in Telstra shares – What are they worth?

Telstra shares are up 34% over the past year, and Macquarie thinks there's more to come.

Read more »