Source : the age
The Australian sharemarket dipped back into the red in afternoon trade, weighed down by hawkish Reserve Bank comments, which boosted bets on more interest rate hikes, and a share plunge by AI data centre operator NextDC.
The S&P/ASX 200 was down 10.4 points, or 0.1 per cent, at 8806.50 at around 2.20pm AEDT, with five of its 11 industry sectors in negative territory. The ASX lost 0.3 per cent on Tuesday. The Australian dollar was 0.2 per cent stronger at US70.18¢.
Stocks wavered in the morning, then turned south after RBA Deputy Governor Andrew Hauser said Australia’s inflation outlook looks “materially worse” than the central bank predicted in August, citing higher oil and technology prices and persistent domestic price pressures.
“We’re seeing higher AI prices, tech prices feeding through into CPI,” Hauser said during a fireside chat on Wednesday, responding to a question about the prospects for a rate hike at the RBA’s policy meeting in early November. Oil prices are about a third higher than the RBA had assumed, with fewer fiscal interventions cushioning the impact on consumers, he added.
Traders priced about a 43 per cent chance of a rate hike at the end of the RBA’s two-day meeting on November 3, up from about 30 per cent before Hauser’s comments, according to swaps data compiled by Bloomberg. A 25 basis point rate hike is all but fully priced for February, brought forward from expectations it may occur in May, the data show.
Hauser “sounds very uncomfortable about how [third-quarter] inflation is shaping up,” said Sean Callow, a senior analyst at ITC Markets in Sydney. “Hauser may be again playing ‘bad cop’ in delivering a warning that another rate hike is looming.”
The inflation comments came on top of a shock profit warning, which had already weighed down the market. Australia’s biggest data centre operator NextDC tanked as much as 45 per cent after it came out of a trading halt slashing its sales and profit forecasts for the year. The stock was still down 37 per cent in early afternoon trade.
NextDC blamed delays with its controversial M3 data centre expansion in Melbourne, due to community resistance to the power grid upgrade, with concerns about noise, emissions and massive power poles close to their homes, for the earnings downgrade.
NextDC said sales are now expected to reach $475 million to $500 million, down from a previous estimate of $615 million to $640 million, and operating earnings would be between $245 million to $265 million, down from its forecast of up to $410 million. The company is looking at “capital recycling opportunities” including the sale of development sites to help it weather the crunch.
Data centre landlord Goodman Group fell 2.4 per cent, pulling down the property sector, while energy and mining stocks also struggled.
Oil giants Woodside and Santos were down 1 per cent and 0.1 per cent, respectively, even as Brent crude resumed its gains to trade above $US110 a barrel as attacks on ships around the Strait of Hormuz threatened shipments. Refiner Ampol rose 0.8 per cent after its two-day slump.
Copper heavyweights BHP and Rio Tinto extended their declines from Tuesday, when BHP said its copper production in the latest quarter had slumped by almost 20 per cent as key mines in Chile were affected by weather and lower-quality ore. BHP shares were down by another 1.4 per cent, while Rio dropped 1.5 per cent. Gold miners Evolution and Newmont lost 1.2 per cent and 1.6 per cent, while Northern Star – which is being eyed for a takeover by South Africa’s Gold Fields – rose 2.9 per cent on the back of a solid trading update.
Meanwhile, the Big Four banks advanced, limiting the bourse’s losses. Commonwealth Bank added 0.3 per cent, National Australia Bank bounced back 1.1 per cent from Tuesday’s losses, Westpac rose 0.5 per cent and ANZ Bank edged up 0.1 per cent.
NextDC’s plunge overshadowed gains by other tech stocks, which tracked US market futures higher as strong earnings from some of Wall Street’s biggest AI players revived confidence in the sector. Software makers WiseTech and Xero were up 1 per cent and 2.8 per cent, while cloud connections provider Megaport jumped 4.2 per cent and family tracking app Life 360 rose 3.6 per cent.
Futures for Wall Street’s Nasdaq 100 jumped 1.1 per cent, suggesting gains when Wall Street opens again for trade, after Elon Musk’s SpaceX reported quarterly net income that more than doubled estimates, sending its shares up more than 5 per cent in late trading. Contracts for the S&P 500 rose 0.4 per cent.
Super Micro Computer also beat expectations, lifting AI-infrastructure shares in extended trading in the US. The results offered some reassurance after concerns over AI valuations and financing rattled tech shares last week.
Attention now turns to a packed earnings slate for signs that growth can justify the billions being poured into computing infrastructure, with Meta Platforms and Tesla due to report early Thursday AEDT.
“Clear earnings beats and constructive corporate updates are helping to ease some of the AI anxiety that has surfaced in recent sessions,” said Tim Waterer, chief market analyst at KCM Trade. “The next test comes with Meta and Tesla. If those reports deliver similarly strong results and guidance, it could go some way toward reigniting broader AI enthusiasm and giving the sector more sustained momentum.”
During regular trading hours, the S&P 500 added 0.3 per cent in its Wednesday session. The Dow Jones Industrial Average rose 1 per cent, while drops for several big tech stocks including Apple and Meta Platforms weighed on the Nasdaq composite, which ended down less than 0.1 per cent.
with AP, Bloomberg, Reuters
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