Australian shares to edge higher despite Wall Street chip rout
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The news: The Australian sharemarket is set to open higher despite Wall Street closing lower overnight, as semiconductor stocks slumped amid concerns over debt-funded AI spending and expectations of a more hawkish US Federal Reserve.
The numbers: Updated at 7:46am AEST:
- ASX futures: up 35 points to 8,787 points
- Wall Street: Dow Jones down 0.09%, S&P 500 down 1.44%, Nasdaq down 2.21%
- Europe: FTSE 100 down 0.09%, CAC 40 down 0.71%, DAX down 0.98%
- Spot gold: down 1.86% to USD4,113 per ounce
- Oil prices: Brent down 1.40% to USD76.81/barrel, US WTI down 0.94% to USD73.16/bbl
- AUD: down 1.19% at 69.17 US cents
- Bitcoin: down 2.18% to USD62,562
The context: All three major US indices closed lower on Tuesday, with the Nasdaq and S&P 500 falling to more than one-week lows, according to Reuters, as weakness in technology stocks weighed on markets. The Philadelphia Semiconductor index and the S&P 500 Information Technology Index fell 7.9% and 3.7% respectively.
Among megacap stocks, Nvidia dropped 4.1% and Alphabet fell 1%. Chipmakers were among the worst performers, with Intel down 6.1%, Marvell Technology losing 9.3% and Advanced Micro Devices falling 5.7%.
The sell-off was driven by concerns over the sustainability of debt-funded AI investments by hyperscalers. SpaceX, which listed earlier this month, has joined a list of megacaps tapping the bond market to fund AI expansion.
Elsewhere, traders are increasingly pricing in a second Federal Reserve rate hike by December, according to LSEG data, compared with expectations of a single 25-basis-point hike just two weeks ago, reflecting expectations of a more hawkish policy stance under new Chair Kevin Warsh.
Brent crude fell to around USD76 ($109) a barrel. The US Senate backed legislation directing Trump to halt US military action against Iran. According to Reuters, it marks the first time both chambers of Congress have passed a resolution under the War Powers Act directing a president to remove US armed forces from hostilities.
Locally, the Australian Bureau of Statistics is scheduled to release the May consumer price index at 11:30am AEST.
