Australian shares extended losses to a fourth day on Wednesday as investors waited to see how aggressively the US central bank would raise interest rates to contain rising inflation.

The S&P/ASX 200 index closed about 1.3% lower at 6,601 in broad-based selling, falling deeper into correction territory. Investors are pricing in an outsized 75-basis-point rate hike by the US Federal Reserve after red-hot inflation data last week, a move that many fear could spur a recession.

“We are in a bear market and that will remain the main trend till the US Fed stops hiking,” said Mathan Somasundaram, chief executive officer at Deep Data Analytics said.

Adding to the downbeat mood, Reserve Bank of Australia Governor Philip Lowe warned that inflation could reach 7% by the end of the year, higher than its prior forecast of 5.9%.

The comment came at a time when markets were already nervous about an outsized Fed rate hike, said Kerry Craig, a global strategist from J.P. Morgan.

Energy stocks led losses on the benchmark index, as Brent prices dropped over demand concerns. Woodside Energy Group and Santos Ltd fell 3.1% and 1%, respectively.

Australian shares plunge over 5% on inflation, China COVID worries

Technology stocks tracked their US peers lower to fall 3.1%. Xero Ltd and ASX-listed shares of Block Inc dropped 5.2% and 7.1%, respectively.

Miners retreated nearly 1%, extending falls to a fourth session.

In other news, the Australian Federal Court approved US private equity firm Blackstone Inc’s $6.3 billion acquisition of casino operator Crown Resorts Ltd. Shares of Crown Resorts inched 0.3% higher.

New Zealand’s benchmark S&P/NZX 50 index fell about 0.1% to 10,635.9.