As it happened: ASX drops 1.2% and records worst session in a week

The market fell early on a mixed Wall Street lead, where sentiment was dulled by a more dovish-than-expected stance from the US Fed. US futures declined throughout the day.

Local losses accelerated after a complicated set of August jobs figures that showed a surprising drop in the unemployment rate from 7.5 per cent to 6.8 per cent and 111,000 jobs added.

However, UBS economists George Tharenou and Carlos Cacho noted the number of people who 'worked less than their usual hours for economic reasons' was broadly unchanged at about one million people.

ThinkMarkets market analyst Carl Capolingua also suggested the improved employment figure could have signalled to markets that less stimulus may be needed to help the nation out of its pandemic-driven decline.

“Obviously, markets want to see good news on the jobs front longer-term and considering the lockdowns in Victoria through August and the resurgence in COVID-related negativity more broadly, it was a decent set of numbers.

“But I think investors took this as a sign that the RBA and the Federal Government may do less than previously expected to boost monetary and fiscal stimulus. So, in a perverse sort of way, the market sold off."

There was little joy at the pointy end of the ASX 200 on Thursday with just a handful of blue-chips adding to their tallies. These included banks Westpac, NAB and ANZ, as well as investment group Macquarie, and supermarket Coles.

Commonwealth Bank fell 1.1 per cent to $65 and CSL weighed with a 1.9 per cent drop to $285.72.
Wesfarmers dropped 1.3 per cent to $44.78, Woolworths 0.7 per cent to $36.48, and toll giant Transurban shed 1.4 per cent to $14.31.

Afterpay led a 3 per cent tech sector decline with a 5.4 per cent drop to $73.84, with Wisetech Global down 4 per cent at $26.76.

Fortescue was the hardest hit of the big miners while Rio Tinto fell by 3.4 per cent to $99.31 for its worst day in more than four months.

Chief investment officer at Australian Eagle Asset Management, Sean Sequeira, said the decline in Fortescue especially appeared to be profit taking.

“We saw iron ore go to a high of $US130 (a tonne) this month and Fortescue didn’t really follow that to new highs, it had done a lot of its rising to new highs a bit earlier,” Mr Sequeira said.

“That tells me that people taking profit because they’re cautious about a further fall in iron ore.”