ASX 200 slumps 5% following Wall Street sell-off

ASX 200 shares are tumbling this morning.

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A shocked man sits at his desk looking at his laptop while talking on his mobile phone with declining arrows in the background representing falling ASX 200 shares today

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Key points

  • The benchmark ASX 200 has fallen hard at the open on Tuesday
  • The move comes after US stocks entered bear territory and digital assets like Bitcoin plummetted
  • Investors appear to be taking inflation and interest rate risk more seriously

Australia’s key benchmark, the S&P/ASX 200 Index (ASX: XJO) has fallen 5% in early trade today amid a widespread sell-off with multiple stocks hitting 52-week lows.

The ASX 200 is now trading at its lowest level since March 2020 – when the pandemic began – as trading resumed following the Queen’s birthday public holiday.

What happened to US stocks overnight?

The ASX 200 sell-off comes after US stocks fell hard overnight. The S&P 500 (INDEXSP: .INX) closed 4% lower at 3,749 and the NASDAQ (INDEXNASDAQ: .IXIC) finished 4.7% in the red.

Meanwhile, digital assets also incurred heavy losses, with Bitcoin (CRYPTO: BTC) losing 15% by the end of the US session.

According to S&P Global data, all 11 US sectors retreated. That included energy – the leading sector this year to date – which slid by more than 5%.

The US Federal Reserve is set to meet on Wednesday. US inflation data released last Friday revealed the highest reading in 40 years. So, there’s speculation the Fed could raise its planned interest rate hike of 0.5%.

With investors shifting focus to inflation and higher interest rates, yields on the Australian 10-year government bond yield have ticked up to more than 4%. That’s the highest level in more than five years.

Meanwhile, oil continues to rally with Brent Crude surging 11 basis points higher overnight to US$122 per barrel. It’s held that level for several days now.

Zooming out to late 2020, the trends are clear. Each of these instruments – including US inflation – has swept upwards over the past 12-18 months, as shown in the graph below.

TradingView Chart

Wall Street’s sell-off on Monday prompted local investors to dump ASX 200 shares en masse at the open.

Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Bitcoin. 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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