Iron ore miners South32 (down 4.7 per cent) and Rio Tinto (down 2.9 per cent) were among the biggest large-cap decliners, and joined heavyweight BHP (down 1.8 per cent) in weighing down the mining sector (down 2 per cent) and the wider market overall.

Harvey Norman (down 3.8 per cent) and JB Hi-Fi (down 2.9 per cent) also declined, as the consumer discretionary sector lost 2.4 per cent.

The Star Entertainment’s shares lost more than 14 per cent as the NSW inquiry into its culture continues. The company’s special manager on Monday alleged the casino operator falsified required welfare checks on pokies players and accidentally allowed customers to take $3.2 million they had not won from its machines.

The big four banks, including the country’s biggest, CBA (down 2.1 per cent), all traded lower and dragged down the financials sector (down 1.9 per cent).

Property developer Mirvac (down 3.6 per cent) and shopping centre owner Scentre (down 1.3 per cent) followed the losses of real estate investment trusts (REITs) in the US, and helped send the local property and real estate sector down 1.9 per cent.

The lowdown

IG Australia market analyst Tony Sycamore said a “perfect storm” of factors led to the substantial losses on the local bourse on Tuesday, with interest-rate sensitive sectors copping the brunt.

“The ASX 200 has succumbed today to a pole-axing of the force last seen during a sell-off in March 2023, when the highly anticipated China re-opening trade collapsed in a heap,” he said.

Sycamore said the tumble in Australian equities on Tuesday was a result of stretched positioning across global equity indices, a third successive month of firm US inflation data contributing to unease within a deeply troubled bond market, and the rising risk of escalation in the Middle East.

US stocks slumped as higher yields in the bond market caused by a strong US economy cranked up the pressure on Wall Street.

The S&P 500 closed 1.2 per cent lower, following up on its 1.6 per cent loss from last week, which was its worst since October. The Dow Jones lost 0.7 per cent and the Nasdaq composite shed 1.8 per cent.

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The S&P 500 had been up as much as 0.9 per cent earlier in the day, rising as oil prices eased with hopes that international efforts to calm escalating tensions in the Middle East may help. But Treasury yields also spurted higher following the latest report on the US economy to blow past expectations.

Strong reports like the one on Monday, which showed US shoppers increased their spending at retailers last month by much more than economists expected, have traders broadly forecasting just one or two cuts to rates this year, according to data from CME Group. That’s down from expectations at the start of the year for six or more cuts.

As a result, real estate investment trusts were among some of Monday’s sharpest losses in the stock market. When bonds are paying higher yields, they peel away investors who might otherwise be interested in the relatively big dividends that real estate stocks pay. High rates can also pressure real estate prices broadly.

Of greater influence was the weakness for Big Tech stocks. Apple dropped 2.2 per cent, Nvidia fell 2.5 per cent and Microsoft sank 2 per cent.

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Helping to keep the losses in check were some financial companies, which reported encouraging profit for the start of the year. The pressure is on companies broadly to deliver fatter profits because interest rates look so much less likely to offer support in the near term.

In the oil market, benchmark US crude was holding steady at $US85.67 per barrel. Brent crude, the international standard, fell 0.5 per cent to $US89.99 per barrel as political leaders around the world urged Israel not to retaliate after Iran’s attack on Saturday involving hundreds of drones, ballistic missiles and cruise missiles.

Financial markets were nervous heading into the weekend. The worry was that an attack by Iran could widen Israel’s war with Hamas and ultimately constrict the flow of crude oil. But Israel said it intercepted 99 per cent of the drones and missiles, and diplomats urged a de-escalation and the US administration made clear it did not support a wider war with Iran.

This year’s jump in oil prices has been raising worries about a knock-on effect on inflation, which has remained stubbornly high. After cooling solidly last year, inflation has consistently come in above forecasts every month so far in 2024.

The yield on the 10-year Treasury rose to 4.63 per cent from 4.52 per cent late on Friday. The two-year yield, which moves more closely with expectations for action by the Federal Reserve, climbed to 4.93 per cent from 4.89 per cent.

In other international stock markets, indexes were mixed across Europe. They struggled more in Asia, where Hong Kong’s Hang Seng and Tokyo’s Nikkei 225 both fell 0.7 per cent.

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“This is very important because it is open to the Senate to hold you in contempt, and that carries potential sanctions including up to six months’ imprisonment for you,” said Greens senator Nick McKim to outgoing Woolworths chief executive Brad Banducci after he repeatedly refused to answer questions about a key measure of the supermarket’s profitability.

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