The Australian share market has recently experienced a period of intense selling pressure, mirroring global market trends. However, there has been a slight reprieve in the last 24 hours, easing immediate concerns over a potential meltdown sparked by US recession fears. The S&P/ASX200 index closed on Tuesday at 7,680, up 0.4% from Monday’s closing price, providing a glimmer of hope for investors.
Despite this positive trading day, the benchmark index had previously shed 5.8% over two volatile days, resulting in the loss of $160 billion in share value. The index is now flat for the year, reflecting the rollercoaster ride that investors have been on in recent days.
The selling pressure in global markets was triggered by weak US jobs data, which raised concerns about a potential recession. The US Federal Reserve’s indication that it would soon start cutting interest rates further fueled these fears, leading investors to unwind their positions in risk assets such as equities and shift their money into safe havens like bonds.
However, amidst the turmoil, there have been signs of resilience in the market. Companies like chip maker Nvidia and the Australian dollar have managed to pare back some of their initial losses, indicating that not all hope is lost.
American investment company BlackRock has expressed the belief that recession fears may be overblown, suggesting that the recent jobs report is more indicative of a slowdown rather than a full-blown recession. This sentiment has helped to stabilize Wall Street’s fear gauge, the CBOE volatility index, which spiked to above 65 before settling back at 38.
The improved sentiment in the market has raised questions among analysts about whether the recent downturn is the beginning of a market crash or simply an overdue pullback after a period of strong returns. Some stocks that were heavily sold off on Monday, such as Commonwealth Bank, rebounded strongly on Tuesday, with CBA shares jumping by 2.2%.
Despite the market’s recent volatility, the Reserve Bank of Australia decided to leave its cash rate unchanged on Tuesday, citing concerns about inflation remaining too high. While the recent selling trend has been consistent globally, some markets have been hit harder than others, with Japan’s Nikkei plunging by 12% on Monday before bouncing back with a 10% rise on Tuesday.
Traders are now bracing for several weeks of potentially volatile trading as the conflicting forces of upbeat market sentiment and recession fears continue to clash. The coming days will be crucial in determining whether the market can maintain its resilience or if further turbulence lies ahead.