Australian stocks ended the week on a soft note, quickly losing the momentum built up through a strong day Thursday.
A near 1 per cent slide Friday rounded off a rollercoaster week that was highlighted by three red days to open and the strongest session in two months on Thursday.
Amid the gyrations the local market barely budged on a weekly basis, edging down 0.2 per cent.
At the close on Friday, the benchmark S&P/ASX 200 index slumped 47 points, or 0.81 per cent, to 5,729.6, while the broader All Ordinaries index surrendered 45.3 points, or 0.78 per cent, to 5,775.4.
“The last 48 hours have arguably been the most volatile period in the market so far this year,” Gary Huxtable, client adviser at Atlantic Pacific Securities, said.
“The strong US dollar was the main catalyst, pushing down our resource stocks.
“While investors have been fortunate enough to realise healthy returns in both financials and resource names over the last few months, further strengthening of the US dollar will make it difficult for this correlation to continue.”
Oil prices slid sharply offshore, as did base metals, while iron ore futures stumbled over 3 per cent in local trade in their worst showing this year.
It was enough to force the big names in resources to swiftly concede all the ground they gained on Thursday as well as push the Australian dollar back below US76c.
“The commodity trade has been at the heart of the Australian dollar move, but this in itself is a huge talking point on the trading floors,” IG chief market strategist Chris Weston said.
“Don’t look at spot iron ore, which rallied 1.2 per cent, it’s all about the Dalian futures market which have been sold fairly aggressively.”
In materials, BHP Billiton dropped 1.4 per cent to $25.34, Fortescue plunged 5.1 per cent to $6.28 and Rio Tinto tumbled 4.1 per cent to $60.92.
In energy, Santos stumbled 2.7 per cent to $3.67, while Woodside lost 0.7 per cent to $30.70.
Wall Street endured its worst day in a month on Thursday night (AEDT), ensuring the bleak outlook for the local market for Friday’s session with rate hike jitters back in play.
“It has been amazing to watch the Fed fund futures market move from pricing the probability of a (March) hike from a lowly 20 per cent in early February to now sit at 90 per cent,” Mr Weston said.
“Interest rate traders have said it is now firmly the base case that they raise and when so many Fed members have shifted into a more hawkish setting and signified a March hike, then the interest rate market participants will not question that.
“(Provided jobs data is robust next week) the question then, of course, becomes how many more hikes do we get this year?”
The answer to that could dictate the performance of the market through the remainder of the year.
In the meantime, traders are cautious with few sectors spared red on Friday.
In finance, the big four banks were all lower, with ANZ off 0.6 per cent, CBA losing 0.8 per cent, NAB easing 0.9 per cent and Westpac sliding 1 per cent.
Among other blue chips, telco giant Telstra bounced 0.4 per cent to $4.59, while Qantas gave back 1.3 per cent to $3.73.
Meanwhile, the Australian dollar ended the local session at US75.55c, weighed by hawkish Fed talk and falling commodity prices. The currency lost US0.15c through the local session and is down over US1c from the close of local trade on Thursday.