Labor accuses government of being ‘complacent’ about economy as ASX200 falls amid fears of a global recession

This article is more than 1 year old

This article is more than 1 year old

The Australian stock market has suffered its worst day in almost 18 months after $63bn was wiped off the value of shares amid mounting fears of a global recession.

The benchmark S&P/ASX200 index on Thursday tumbled 187.8 points, or 2.85%, to 6,408.1 points, while the broader All Ordinaries shed 186.7 points, or 2.8%, to 6,490.8 points.

It was the market’s worst day since 6 February 2018, when the ASX200 lost 192.9 points, or 3.2%.

Shares fall steeply in Asia as financial markets rocked by recession warnings – business live Read more

Stronger than expected employment figures showed 41,000 jobs were created in July, but they were not enough to stop the bleeding across all sectors of the market from mining to consumer stocks.

Australia’s big four banks – Commonwealth, Westpac, NAB and ANZ – each slumped around 3%. The miners, which are highly dependent on continuous global growth for demand, were firmly in the red. BHP and Rio Tinto dropped 2.8% and 2.7%, respectively.

“I think we’re in for a lot more pain for the months ahead,” said Xchainge founder Nick Twidale.

“I think there could be a significant downside correction to come in the next month of so,” he said, adding the only thing he saw that could boost the market would be a US-China trade deal.

However, the prospects of adeal receded on Thursday when the Chinese finance ministry accused Washington of violating the consensus drawn up between Donald Trump and Xi Jinping.

Beijing is especially peeved that Trump announced a new 10% tariff on $300bn of China’s exports this month and now says it will have to proceed with “countermeasures”, suggesting it will further escalate the trade war.

Share prices fell across Asia-Pacific on the back of huge losses on Wall Street on Wednesday that were sparked by concerns that the inversion of the US bond yield curve – where investors are rewarded less for long-term investing than short term – were pointing towards an imminent recession.

“US-China trade tensions have metastasised into something more sinister by affecting global growth to such a large degree that bond markets are pricing-in a high probability of a worldwide recession,” warned Stephen Innes, managing partner at VM Markets.

Signs of recession in Germany and a possible continued weakening of Chinese growth fuelled concern.

A key indicator of the global economy, the price of oil, also headed into the red, dragging down energy companies such as Woodside Petroleum, which closed 6.7% lower.

The Aussie dollar held its own, however, climbing slightly to US67.83c from US67.82c on Wednesday.

However, the finance minister, Mathias Cormann, said he believed Australia’s economy was heading in the right direction, despite the global and domestic risks.

Labor argues the government is being “complacent” about the economy, citing the ASX losses as further evidence the economy is in trouble.

“We are heading in the right direction,” Cormann told reporters in Perth on Thursday. “We are facing some risks in the global economy and in the domestic economy.

“We will continue to do everything we can to address them appropriately so that all Australians have the best possible opportunity to get ahead.”