Well, it’s looking like the S&P/ASX 200 Index (ASX: XJO) and ASX shares are set to end the trading week on a bit of a low note. So far today, the ASX 200 has lost a nasty 1.97%. That pulls the Index down significantly from the 7,311 points it closed at yesterday to the 7,167 points it has gotten down to at the time of writing. 

We see these market losses reflected in most of the ASX 200’s most prominent shares. Commonwealth Bank of Australia (ASX: CBA) is faring awfully today, having lost a depressing 2.93% at present at $95.82 a share. The other ASX 200 banks aren’t faring much better, with Westpac Banking Corp (ASX: WBC) and ANZ Group Holdings Ltd (ASX: ANZ) both down more than 3%.

The ASX 200’s largest constituent, BHP Group Ltd (ASX: BHP) isn’t doing much better. BHP shares have presently lost 2.6% of their value and are down to $45.38 a share. With Telstra Group Ltd (ASX: TLS), CSL Limited (ASX: CSL) and Woodside Energy Group Ltd (ASX: WDS) also nursing losses, it’s hard to find many ASX 200 shares in the green today.

These nasty market losses have built on the jitters we’ve seen for most of the week. Since Tuesday’s session, the ASX 200 has now slipped by a meaningful 2.8% or so. This has pulled the ASX 200 down significantly, with the Index now at a level we haven’t seen for almost exactly two months.

Yes, ASX 200 shares are now at the same level they were at in early January. The market is also down by more than 5% since it reached its 2023 high in early February.

So what’s going on here?

Why are ASX 200 shares at a two-month low?

Well, it’s fairly obvious the contagion of this market panic has started over in the United States. US markets have also had a tumultuous week. Last night, the S&P 500 Index (SP: .INX), which is the flagship index covering the US markets, tumbled by 1.85%.

Since Monday’s trading, the S&P 500 has lost more than 3.2%. So it was always going to be hard for ASX shares to do well with these losses across the Pacific.

It seems this recent weakness in the US markets has stemmed from comments that Federal Reserve chair Jerome Powell made to the US Congress this week. As my Fool colleague Bernd covered earlier this week, Powell said the following to the United States Senate Banking Committee:

The latest economic data have come in stronger than expected, which suggests that the ultimate level of interest rates is likely to be higher than previously anticipated. If the totality of the data were to indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes.

This is exactly the kind of news investors hate. Higher interest rates mean that more money is going to be pulled out of the US economy (and by extension, the global economy) in order to control American inflation. And that is bad news for share markets.

Higher rates also increase the appeal of cash investments like term deposits and savings accounts, which tends to see money moving out of ‘risky’ assets like shares and into the ‘safety’ of the bank.

So no wonder Powell’s comments spooked US investors, and consequentially, ASX investors.

So it looks like this is why both the ASX and the US have had such a dire end to the trading week. Let’s hope the pessimism doesn’t last the weekend.

The post ASX 200 sinks to 2-month low on US market jitters appeared first on The Motley Fool Australia.

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More reading

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• Novonix shares will soon be booted out of the ASX 200. What might this mean for investors?
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• Is the party well and truly over for ASX 200 coal shares?

Motley Fool contributor Sebastian Bowen has positions in Telstra Group. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended CSL. The Motley Fool Australia has positions in and has recommended Telstra Group. The Motley Fool Australia has recommended Westpac Banking. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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