American unemployment surprise result causes Australian share market plunge
The creation of new jobs in the United States has sparked inflation fears, causing the Australian share market to plunge.
Good news on American jobs has caused the Australian share market to plunge with investors worried high inflation will stop the US Federal Reserve from being able to cut interest rates.
The benchmark S&P/ASX200 was 1 per cent weaker during the first hour of trade on the Australian Securities Exchange, wiping about $16 billion off shares, as it fell to 8550 points shortly after 11am AEST, following Monday’s King’s Birthday public holiday.
The surprise addition of 172,000 jobs in May in the American non-farm payrolls strengthened the US dollar, with the good news from the US Department of Labour on Friday night hurting mining and software stocks in Australia.
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By continuing you agree to our Terms and Privacy Policy.With American inflation at a three-year high of 3.8 per cent, financial markets are worried the US Federal Reserve won’t be able to cut interest rates, Moomoo chief executive Michael McCarthy said.
“Central banks and governments will act to stop inflation, even at the risk of putting the economy into recession because inflation spirals are so damaging,” he told The Nightly.
The US jobless rate remained at 4.3 per cent, convincing investors the US Fed was likely to raise interest rates this year for the first time since 2023.
“There is no need whatsoever for lower rates in the US. The economy, as judged by employment numbers, is still running hot over there,” Mr McCarthy said.
“The issue for the share market is that although interest rate markets in the US are now no longer reflecting the potential for rate cuts, they’re yet to reflect rate hikes and given the heat that we’re seeing in the economy, that is likely the next thing.”
The big miners took a hit with BHP losing 2.3 per cent to $59.86 as Rio Tinto also fell by 2.3 per cent to $180.40.
“Strengthening US dollar is weighing on all commodity prices,” Mr McCarthy said.
Software also took a hit, following a weak lead from the US, with WiseTech global plummeting 5.1 per cent to $37.78.
Business confidence is still at negative levels with NAB’s reading for May producing a score of minus 14 points as a result of the Middle East conflict.
“Price and costs growth also eased in the month but remain elevated – particularly purchase costs which signal the ongoing risks of the cost shock emanating from the Middle East still making its way through supply chains,” NAB economists said.
