The ASX 200 was driven lower yesterday by 1.8%, marking the second day of losses and edging it closer towards similar lows seen at the end of last month.
Previously, it was a global market sell-off that triggered a downward plunge.
This time, the factors are a more Australia-specific. Although a previous global market sell-off is one of the factors.
Factor one: US market turmoil
The Dow Jones Industrial Average closed 2.3% lower on Tuesday, and similar to last time around the ASX was mauled.
When markets opened yesterday there were hopes the risk-off contagion would not spread — but this was quickly proven to not be the case by around 11:30am.
It was largely downhill from there.
Factor two: fall in oil/iron ore prices
Mining and resources form an integral part of the Australian economy and a recent drop in iron ore prices and falling oil prices hurt companies like Beach Energy Limited [ASX:BPT].
The major miners were also down, with BHP Billiton Ltd [ASX:BHP] and Rio Tinto Ltd [ASX:RIO] down 2.5% and 2.8% respectively.
Factor three: financial sector pain continues
As covered extensively here on Markets & Money, the financial sector has been hammered by the Banking Royal Commission.
There has been news that National Australia Bank Ltd [ASX:NAB] will struggle to cope with new capital requirements.
Westpac Banking Corp [ASX:WBC] is set to be whacked with an increased fine for dodgy mortgage loans.
Additionally, Australia and New Zealand Banking Group Ltd [ASX:ANZ] has had to tighten lending rules.
All up, the combination of a US sell-off, lower iron ore/oil prices and financial sector chaos created the conditions necessary for an ASX plunge.
This was in spite of strong wage growth news out of the Australian Bureau of Statistics (ABS).
Investors will be looking for better news today in the ABS jobs report.
For Markets & Money
PS: Free Report: Why Australia’s 26-Year Economic Dream Run is ending. Read the report now.