Miners weigh down ASX, Wall Street’s tech tumble

The Australian sharemarket has opened lower after AI stocks tumbled on Wall Street, while oil prices hit their highest levels since May on worries about the war with Iran.

The S&P/ASX 200 was down 35.1 points, or 0.4 per cent in early trade, with seven of 11 industry sectors higher but mining stocks are weighing heavily on the index. The Australian dollar was weaker at US70.19¢.

Mining stocks slumped with iron ore futures losing 1 per cent to fall to $US90 per tonne. BHP dropped 2.5 per cent in early trade while Fortescue fell 1.9 per cent and Rio Tinto retreated 2.2 per cent. Gold miners also lost ground, with Northern Star losing 2.1 per cent and Evolution Mining falling 1.8 per cent.

Financial stocks advanced with Commonwealth Bank and Westpac adding 1 per cent while National Australia Bank rose 1.2 per cent and ANZ Bank climbed 0.5 per cent.

Energy stocks are lower despite oil prices holding their biggest gain in about a week, as intensifying attacks on Saudi Arabia stoked fears of supply disruptions. West Texas Intermediate traded near $US99 a barrel after closing 2.4 per cent higher in the previous session, while Brent settled above $US113. Iran-backed Houthi militants claimed responsibility for recent attacks on the Saudi Red Sea port of Yanbu, as well as deadly strikes on an oil field and airport in the kingdom. The flareup threatens to widen hostilities around the Strait of Hormuz, where crude exports have recovered to near prewar levels. Woodside Energy lost 0.8 per cent, Santos fell 2.6 per cent while among the refiners, Ampol shed 1.8 per cent and Viva Energy lost 2 per cent in early trade.

Technology stocks are lower after a tumultuous session for the sector on Wall Street. Megaport plunged 8.4 per cent, NEXTDC slumped 4.9 per cent, Codan shed 3.4 per cent and WiseTech fell 2.1 per cent in early trade.

Nick Scali clawed back some of its 15.3 per cent dive in the previous session after a profit warning with a gain of 1.9 per cent in early trade this morning. The retailer warned on Thursday its sales in the December half will be 11 per cent to 14 per cent below last year’s, as consumers tightened their belts after the federal budget in May.

Overnight, the S&P 500 fell 1.2 per cent for its worst day since July, while the Nasdaq composite tumbled 2.6 per cent. The weakness for tech stocks was so overwhelming that it masked strength for the rest of the market, where the majority of US stocks actually rose. The Dow Jones Industrial Average edged up less than 0.1 per cent.

AI-related stocks on Wall Street have been shaky on worries that their boom may be under threat because of how expensive it’s become to borrow money to build data centres and buy more AI chips. Concerns also remain that stock prices simply shot too high in their years-long frenzy, even though companies in the industry continue to report growth.

Lam Research, whose equipment and services help make semiconductors, reported gains in profit and revenue for the summer that were slightly stronger than analysts expected, for example. Usually, that helps boost a stock’s price, but Lam Research’s tumbled 11.8 per cent.

Other big tech stocks were unsettled following their own quarterly reports that included at least some encouraging nuggets.

Meta Platforms, which is pushing its Muse AI agent, lost 7 per cent after reporting stronger revenue for the latest quarter than analysts expected, though its profit fell short. The company behind Facebook and Instagram also said it’s creating a new class of stock to raise money to pay for AI investments and other expenses.

Tesla slipped 3.1 per cent after flipping between gains and losses in the morning. It reported a stronger profit for the summer than analysts expected, though its revenue was weaker than forecast.

The global tide against AI stocks knocked Nvidia down 4.4 per cent. Because it’s the largest stock on Wall Street by total value, the chip giant was the heaviest weight on the S&P 500.

CoreWeave, which has borrowed money to buy Nvidia’s AI chips that it rents out to customers over the cloud, has been particularly shaky in recent weeks because of worries about its debt. It dropped 9.6 per cent, though it’s swung between wide gains and losses of roughly 4 per cent within each of the last two days.

The weakness for AI and other tech stocks began in Asia, where South Korea’s Kospi tumbled 3.5 per cent, Hong Kong’s Hang Seng dropped 3 per cent and Japan’s Nikkei 225 sank 2.7 per cent.

In Europe, France’s CAC 40 stock index fell to one of the continent’s sharpest losses with a drop of 1.4 per cent. It was hurt by another jump in yields for French government bonds. Violent protests across France have raised pressure on the government to increase spending, which could add further to its debt.

Worries about big government debt are weighing on almost every developed economy in the world, including the United States. Such concerns have pushed yields in the US bond market to their highest levels in decades, along with high inflation, signals of a still-strong US economy and other factors.

But US yields nevertheless fell sharply in a signal that investors were buying US government bonds in search of something safer to own as AI stocks tumbled.

Thursday’s drop in yields came even as another report suggested the US economy may be doing better than economists expected. It said fewer US workers applied for unemployment benefits last week, which could signal that layoffs remain low across the country.

That solid economy has helped US companies broadly to make bigger profits, which is what propelled the US stock market to a record high earlier this month despite the many worries tugging at it. The majority of stocks within the S&P 500 rose on Thursday, only to get drowned out by the drops for more influential tech stocks.

With AP, Bloomberg

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