Fed's rate hike worries spilled over into Aussie ETFs

Aussie equity investors continued to dump risky assets as worries of more aggressive tightening by the U.S. Federal Reserve mount on market sentiment. Australia's benchmark index, the S&P/ASX 200 (XJO), fell 2.49% to close at an 8-month low of 6,961.6 on Tuesday. Investors also weighed the prospects of rate hikes in Australia after the country’s core inflation accelerated above the central bank target at 2.6% in the fourth quarter of 2021.

Nearly all sectors sub-indices of the XJO dropped, led by losses in energy (-4.07%), technology (-3.22%), mining (-3.12%), and financial (-2.68%). Notable decliners include Commonwealth Bank (-2.74%), CSL (-2.18%), BHP Group (-1.25%) and National Australia Bank (-3.74%).

Market jitters spilled over into Australian Equity ETFs as investors pull out over US$350 million from ETFs with exposure to the main S&P/ASX 200 index in the first three weeks of the year. On Tuesday, iShares Core S&P/ASX 200 ETF (IOZ) and SPDR S&P/ASX 200 FUND (STW) fell by more than -2.4% each (in A$ terms). Meanwhile, European ETFs with similar exposure, including the Xtrackers S&P ASX 200 UCITS ETF (XAUS) and Lyxor Australia (S&P/ASX 200) UCITS ETF (AUST) have been trending higher (11:00 AM, GMT +1) since the EU markets opening bells.

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