Source : THE AGE NEWS
The Australian sharemarket fell to its lowest level in more than three months on Tuesday, weighed down by the mining heavyweights and the big four banks after another jump in oil prices, which sent US bond yields to their highest point in almost two decades amid expectations of rate rises in the world’s largest economy.
The S&P/ASX 200 finished down 77.4 points, or 0.9 per cent, at 8672.50, the lowest close since early June. Six of the local market’s 11 industry sectors declined. The Australian dollar was trading down 0.3 per cent at US71.19¢.
US sharemarket futures dropped 0.4 per cent by late afternoon, indicating a fall when Wall Street opens for its Tuesday session, after yields on the benchmark 10-year Treasury note climbed four basis points to 5.02 per cent. Australian 10-year bond yields were up 8 basis points at 5.41 per cent.
Oil pushed higher as traders weighed risks to Middle East supplies, with a critical Saudi Arabian pipeline still offline following attacks. Brent advanced above $US107 a barrel after adding 1 per cent on Monday. The East-West pipeline – a workaround for Strait of Hormuz flows – was shut last week and Saudi Aramco is yet to say how long the disruption will last.
“The attacks on oil infrastructure mark a meaningful escalation,” Goldman Sachs analysts including Yulia Zhestkova Grigsby said in a note to clients, citing developments including the pipeline attack. At this stage, the affected volumes and the duration of the outages remain uncertain, they added.
While higher oil prices have tended to buoy energy stocks, concerns about lasting supply disruptions now weighed on them, sending oil and gas giants Woodside and Santos down 2.2 per cent and 2.1 per cent, respectively. Refiners Ampol and Viva Energy dropped 0.5 per cent and 1 per cent.
Meanwhile, mining giants BHP and Rio Tinto fell 2.2 per cent and 2.1 per cent, respectively, as copper prices edged lower amid rising bets that the mounting energy costs will prompt the Federal Reserve this week to raise interest rates for the first time since 2023 to rein in inflation, slowing global demand for minerals. Fortescue Metals dropped 1.9 per cent.
The rate-rise bets also pushed down gold stocks, which slumped as bullion hovered around $US4290 an ounce, a five-week low. Traders are now pricing in a 92 per cent chance of a rate increase when the US central bank meets in the coming days. Higher borrowing costs are negative for gold, which doesn’t pay interest. Northern Star Resources fell 2.6 per cent, Evolution Mining slid 3.1 per cent and Newmont was down 2.2 per cent.
Financial stocks, which make up about a third of the ASX, also struggled, with Commonwealth Bank slipping 1.6 per cent, National Australia Bank down 1.3 per cent, ANZ Bank falling 1.1 per cent and Westpac shedding 0.5 per cent. “Millionaires factory” Macquarie lost 2.5 per cent.
Tech stocks, however, shrugged off AI losses on Wall Street over calls by industry leaders that the new technology should be reined in, and regained some ground in local trade. Software makers Wisetech and Technology One were up 1.9 per cent and 0.5 per cent, respectively, while family tracking app Life 360 rallied 5 per cent. AI data centre operator NextDC, however, fell 4 per cent.
On Wall Street overnight, the S&P 500 fell a relatively modest 0.5 per cent. The Dow Jones Industrial Average dropped 0.3 per cent, and the Nasdaq composite sank 0.6 per cent after clawing back most of an early loss of 1.3 per cent.
AI stocks have been under pressure in the US because of worries their prices shot too high in the frenzy around the technology. The concerns jumped to another level over the weekend after one of the industry’s leading voices, Anthropic CEO Dario Amodei, called for a deliberate and global slowdown in the development of AI.
Amodei cited safety issues, including the risk that AI becomes capable of leading a swarm of agents that could take over the entire internet within six to 12 months. Nvidia, whose profits have soared because its chips are helping to train AI models, sank 3.4 per cent and was the heaviest weight on the market because of its massive size.
SpaceX, which gets a chunk of its business from AI, fell 2 per cent after Elon Musk said over the weekend that he agreed with Amodei. Softbank Group, the Japanese giant that is a major investor in OpenAI, lost 10.7 per cent in Tokyo after OpenAI’s Sam Altman likewise supported the concept of a slowdown.
Altman also said in an interview with Fortune that the company behind ChatGPT would probably wait until next year for a sale of its stock on Wall Street. That would delay a potential gusher of cash for Softbank and other early investors in OpenAI.
In South Korea, the Kospi index dropped 3.3 per cent due to losses for its two most influential stocks, Samsung Electronics and SK Hynix.
US President Donald Trump played down the need for his administration to check the development of AI, saying he worried about ceding his country’s edge over China in a global competition and that winning would help address the risks from the advancing technology.
Even with many voices inside and outside the AI industry calling for a slowdown to protect humanity, Trump said on his social media network that the only guardrail it needs “is a STRONG AND SMART (High IQ!) PRESIDENT, and the U.S.A. has that, in spades!”
Helping to limit Wall Street’s losses on Monday were several software companies that tumbled earlier on worries AI-powered competitors would undercut their businesses.
Intuit, the company behind TurboTax and QuickBooks, rose 5.5 per cent. Autodesk, whose software helps designers, climbed 7.8 per cent, and Adobe added 5.3 per cent.
With AP, Bloomberg
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