ASX 200 Plunges Nearly 2% to Four-Month Low as Surging Bond Yields Wipe Billions From Australian Shares

SYDNEY — Australian shares tumbled nearly 2% on Thursday, sinking to their lowest level in four months as climbing global bond yields, elevated oil prices and a late sell-off on Wall Street rattled investors at the start of the new quarter.

The benchmark S&P/ASX 200 index was down 171.1 points, or 1.95%, at 8,618.2 as of 1:46 p.m. AEST, wiping out Wednesday's rally and then some. The index had closed Wednesday up 80 points, or 0.92%, at 8,789.3.

The decline pushed the market to its lowest level since mid-June, with every sector in the red. About 50 billion Australian dollars was wiped off the value of the market by early afternoon, according to ABC News, when the index was down about 1.8%.

Bond yields drive the sell-off

Rising borrowing costs were at the center of the slide. Australia's policy-sensitive three-year government bond yield climbed another 3 basis points to 4.98%, after reversing a sizeable intraday drop on Wednesday.

Overseas, U.S. long-term Treasury yields continued their steep climb. The 10-year yield rose 5 basis points to 5.29%, near its highest level since 2007, while the 30-year yield climbed 6 basis points to 5.63%, around its highest since 2002.

Market Index lead writer Kerry Sun said Thursday's session felt like a reminder that "nothing has actually changed," noting that Wednesday's rebound had come despite persistent pressure from yields and oil prices. Brent crude remained above $100 a barrel.

The drop came a day after the Reserve Bank of Australia's fourth interest rate increase of the year, which lifted the cash rate to a 15-year high of 4.6%, was followed by a brief rally in rate-sensitive stocks. That optimism faded Thursday as yields resumed their climb.

Wall Street's late slump

The local market also took its cue from an abrupt late sell-off in New York. U.S. stocks had rallied early Wednesday after a cooler-than-expected inflation report, but the gains evaporated in the final minutes of trading.

The S&P 500 was up about 0.3% in the last half hour of the session before falling to close 0.25% lower. The Dow Jones Industrial Average dropped 0.86%, while the Nasdaq rose 0.24%. The losses capped a losing September for both the S&P 500 and the Dow.

The U.S. core personal consumption expenditures price index, the Federal Reserve's preferred inflation gauge, rose 3% from a year earlier in August, below forecasts of 3.3%. The softer data cut market bets on an October Fed rate hike to about 37%, from more than 80% earlier in the month, after New York Fed President John Williams said there was "no need for urgency."

But long-dated Treasury yields held near multi-decade highs as traders turned their attention to Friday's U.S. jobs report.

RBA warns of financial risks

Adding to the cautious mood, the Reserve Bank of Australia released its October Financial Stability Review on Thursday, warning that global and operational threats now pose the most prominent risks to the financial system.

The central bank flagged rising government debt and leveraged hedge fund activity in bond markets, which it said raise the prospect of a disorderly sell-off. It also pointed to an increasingly debt-funded artificial intelligence investment boom, warning that a shift in sentiment about the profitability of big tech companies could trigger a sharp repricing of risk.

The RBA said domestic risks were not systemic at present, with about 2% of owner-occupiers with variable-rate mortgages facing a cash flow shortfall.

Lynas slides on Meteoric deal

Among individual stocks, Lynas Rare Earths fell about 6% after announcing a 968 million Australian dollar all-scrip deal to acquire Meteoric Resources and its Caldeira rare earths project in Brazil, the largest known ionic clay rare earths resource outside China.

Investors weighed the expanded resource base against Caldeira's projected development cost of $498 million. Meteoric shares jumped about 50%, while other ASX companies with Brazilian rare earths exposure, including Viridis Mining and Brazilian Rare Earths, also rallied.

Lithium miners were among the biggest decliners. Liontown Resources dropped 10% after Macquarie trimmed its price target, citing higher costs and a slower production ramp-up at its Kathleen Valley expansion. Cochlear fell 5.4%, Suncorp slid 4.3% and Yancoal lost 4.7% after completing its $1.85 billion acquisition of the Kestrel coal mine.

Bright spots

A handful of stocks bucked the trend. Data#3 surged as much as 23% after forecasting first-half pre-tax profit growth of more than 40%, well above analysts' expectations.

Software company Life360 rose 3.6% in early trading, and some uranium names gained after the United States unveiled a $200 billion South Korean investment package that includes a framework for up to eight nuclear reactors.

Transurban announced a 4.5 billion Australian dollar deal to buy out Canadian pension fund CPPIB's stakes in three Sydney toll roads, funded entirely with debt.

Micron results highlight AI boom

Overnight, U.S. chipmaker Micron Technology reported quarterly revenue of $54.23 billion, up 379% from a year earlier, and issued guidance well above expectations, reinforcing the strength of the AI-driven memory boom.

"We expect FY27 to be even better," the company said, adding that it expects memory and storage supply to be much tighter in 2027 and 2028.

China property woes

Investors were also watching China, Australia's largest trading partner, where the property downturn continues to deepen. Beijing's latest mortgage subsidy measures were narrower and smaller than expected, offering limited relief to a sector now five years into its slump.

Investors will turn their attention to Friday's U.S. nonfarm payrolls report for further clues on the path of Federal Reserve policy and global bond yields. Locally, the Reserve Bank's next policy meeting on Nov. 3 and the September consumer price index, due Oct. 28, remain key events for rate-sensitive sectors.