The local share market has lost ground for a second day as fallout from Fitch Ratings' downgrade of the United States' credit rating continues.
The benchmark S&P/ASX200 index on Thursday finished 42.8 points lower, dropping 0.58 per cent to 7,311.8, while the broader All Ordinaries fell 46 points, or 0.61 per cent, to 7,522.4.
The losses came after an overnight sell-off on Wall Street, where the Nasdaq suffered its worst losses since February following Fitch stating its disquiet about the state of US governance and fiscal management.
"Fitch’s US downgrade may not be much of a concern itself, but the timing made it a catalyst for the selloff, as equities may be overbought, and a deep correction may have been overdue," wrote Auckland-based CMC Markets analyst Tina Teng.
A stronger-than-expected US jobs report by payroll processor ADP, issued in advance of the official monthly government readout on Friday, also caused bond yields to rise and put a damper on risk sentiment.
"The ongoing strong US job creation challenges the markets' optimistic 'soft landing' expectations, as a tight labour market points to ‘sticky’ core inflation holding up, which in turn could see the US Fed tighten policy further, or hold settings in ‘restrictive’ territory for quite some time," explained Corpay APAC currency analyst Peter Dragicevich.
Closer to home, traders were also digesting word from the Australian Bureau of Statistics that retail trade volumes declined 0.5 per cent in the June quarter, their third straight quarterly decline - and the first time that has occurred since 2008.
Retail turnover in the three-month span was down 1.4 per cent, compared with the same quarter last year, the weakest annual figures in decades, apart from during the COVID-19 pandemic.
"The 'challenging' times for retailers have just begun. The question for investors is to gauge how retailers are responding to the challenges," said CommSec chief economist Craig James.
Nine of the ASX's 11 sectors finished lower, with consumer staples basically flat and telecommunications edging 0.2 per cent higher.
Technology was the biggest loser, falling 1.6 per cent as Xero dropped 2.7 per cent and Wisetech Global retreated 1.4 per cent.
In the heavyweight materials sector, BHP was down 1.2 per cent to $45.31, Fortescue Metals fell 1.3 per cent to $21.28 and Rio Tinto retreated 1.7 per cent to $113.88.
Building materials companies had a tough day, with James Hardie down 2.8 per cent, Boral dropping 2.1 per cent and CSR down 1.9 per cent.
Downer EDI fell 3.8 per cent to $4.26 after the integrated services company said it would write off $549.6m in goodwill, in part due to a reassessment of its pipeline of work in the defence sector.
All of the Big Four banks were lower, with CBA down 1.0 per cent to $102.46, NAB falling 0.6 per cent to $27.93 and Westpac and ANZ both dipping 0.4 per cent, to $21.90 and $25.26, respectively.
Solvar plunged 34.1 per cent to a three-year low of $1.15 after the automotive finance specialist formerly known as Money3 said its 2023/24 earnings would be reduced by central bank rate hikes reducing the profitability of its back book loans.
In foreign exchange, the local currency had dropped to its lowest level since June 1 against its US counterpart, buying 65.37 US cents, from 65.79 US cents at Wednesday's ASX close.
It is down 4.2 per cent against the greenback so far this year and has recently fallen against most other major currencies, pressured by the negative risk sentiment, drops in commodity prices and the Reserve Bank's decision on Tuesday to keep interest rates on hold.
Against the Euro and the British pound, the Aussie is at its lowest level since May 2020, buying 51.45 British pence and 59.77 Euro cents.
Since the start of the year, the Aussie has fallen 8.7 per cent against the pound and 6.2 per cent against the Euro.
It could fall further against the pound if the Bank of England delivers a double-sized 50 basis point rate hike at its latest meeting on Thursday night AEST, as some economists predict.
ON THE ASX:
* The S&P/ASX200 index finished Thursday down 42.8 points, or 0.58 per cent, at 7,311.8.
* The All Ordinaries dropped 46 points, or 0.61 per cent, to 7,522.4
CURRENCY SNAPSHOT:
One Australian dollar buys:
* 65.37 US cents, from 65.79 US cents at Wednesday's ASX close
* 93.81 Japanese yen, from 93.87 Japanese yen
* 59.77 Euro cents, from 59.89 Euro cents
* 51.45 British pence, from 51.52 pence
* 107.58 NZ cents, from 107.84 NZ cents.
