The Australian share market has dropped to a more than two-month low after the Federal Reserve hammered home that interest rates would likely stay higher for longer.
The benchmark S&P/ASX200 index dropped for a fourth straight session on Thursday, falling 98.1 points, or 1.37 per cent, to 7,065.2 - its lowest close since July 10.
The broader All Ordinaries fell 95.3 points, or 1.29 per cent, to 7,266.6.
While the Federal Reserve early on Thursday left interest rates unchanged, as was widely expected, the rhetoric from its chairman Jerome Powell was more hawkish than anticipated.
The Fed also indicated it was pencilling-in one more rate hike this year and predicted it would not cut rates next year as quickly as previously forecast, given the resilience of the US economy.
The move prompted a selloff in US treasuries, with two- and 10-year yields hitting their highest levels since the global financial crisis.
The two-year yield of 5.2 per cent is now "squarely in the danger zone many identify as pushing markets towards a breaking point," commented Capital.com analyst Kyle Rodda.
"Even if high rates don’t 'break anything,' one must ask how relatively appealing equities are when you can get a risk-free nominal yield above five per cent and a real yield close to three per cent."
The selloff in US treasury bonds also spread to Australian bonds, with yields for 10-years - which rise when their prices fall - hitting their highest level since late 2013.
Globally, more rate hikes were on the horizon, with the central banks of Sweden, Norway and Switzerland all expected to enact rate hikes within the next 24 hours.
Opinion was divided on what the Bank of England would announce on Thursday night, Australia time, while the Bank of Japan is expected to leave rates unchanged on Friday.
IG market analyst Tony Sycamore said that against a backdrop of widespread risk aversion, Thursday's ASX's session was only ever going to be messy.
He warned that from a technical standpoint, there was now very little in the way of support for the ASX200 until its July 2022 low of 6,998, also the bottom of the index's six-month range.
Every sector of the ASX finished lower with financials slipping the most, by 1.8 per cent.
The Big Four banks dropped to their lowest levels in about four weeks, with Westpac falling 2.5 per cent to a one-month low of $20.99, NAB down 2.2 per cent to $28.75, CBA retreating 1.7 per cent to $100.08 and ANZ dropping 1.9 per cent to $25.05.
In the heavyweight mining sector, BHP fell 1.2 per cent to $44.10, Fortescue dropped 0.5 per cent to $20.51 and Rio Tinto closed 1.0 per cent lower at $115.90.
Transurban fell 3.7 per cent to $12.65 after the competition regulator opposed its proposed $2 billion acquisition of Horizon Roads, the operator of the EastLink toll road in Melbourne.
Transurban said it was disappointed by the Australian Competition and Consumer Commission's decision and was reviewing its options.
The Australian dollar was buying 64.18 US cents, from 64.54 US cents at Wednesday's close.
ON THE ASX:
* The S&P/ASX200 index finished Thursday down 98.1 points at 7,065.2, a drop of 1.37 per cent.
* The All Ordinaries fell 95.3 points, or 1.29 per cent, to 7,266.6.
CURRENCY SNAPSHOT:
One Australian dollar buys:
* 64.18 US cents, from 64.54 US cents at Wednesday's ASX close
* 95.15 Japanese yen, from 95.47 Japanese yen
* 60.31 Euro cents, from 60.43 Euro cents
* 52.08 British pence, from 52.10 British pence
* 108.45 NZ cents, from 106.68 NZ cents
