ASX falls as Iran tensions escalate; Wall Street hit by AI stock declines, Middle East tensions
Staff writers
Updated ,first published
Australia’s stock market fell on Thursday as rising tensions in the Middle East cast doubt on when America and Iran could reach a deal to reopen the Strait of Hormuz, putting technology shares under further pressure on Wall Street.
The ASX/S&P 200 index fell 20.1 points, or 0.2 per cent, to end at 8633.20; Banks and technology stocks led losses after the United States began a new round of attacks against targets in Iran. A flight into defensive sectors such as consumer shares blunted the decline: seven of the ASX’s 11 industrial sectors still finished in the green. The Australian dollar was trading at 70.03¢.
“Markets are increasingly concerned that a protracted conflict will prolong the disruption to energy supply routes,” said Moomoo trading manager Chris Strazzeri.
The latest attacks reveal Trump’s growing impatience with peace efforts that have stalled after months of failed negotiations. They also argue that the April ceasefire between the warring countries has effectively collapsed, although there has been no return to the large-scale bombing campaigns seen at the beginning of the conflict.
“We’re going to attack them, we’re going to attack them very hard,” Trump told reporters at the White House before the latest attacks were announced. “We hit them hard yesterday, we will hit them today too.”
The rise in the Persian Gulf caused oil prices to rise; Brent crude rose more than 2 percent to over $95 a barrel; West Texas Intermediate crude rose to $93 before losing its gains after the US military announced the end of the short campaign.
Energy shares rise on ASX; Woodside Energy rose 1.6 percent and Santos rose 2 percent. Coal producers also made gains; Yancoal gained 4 percent and Whitehaven Coal gained 1.6 percent; Because coal is emerging as an increasingly attractive alternative to oil for energy-starved countries in Asia.
“China has been restocking large amounts of coal in recent months,” said Stamatis Tsantanis, CEO of Seanergy Maritime Holdings. “Most importantly, coal is also becoming a strategic commodity for the United States.”
Meanwhile, technology stocks continued their ups and downs. AI-related stocks tumbled again during a tumultuous month on Wall Street. Xero lost 3.6 percent, WiseTech lost 2.6 percent, NextDC lost 4.2 percent and Technology One lost 1.6 percent.
Financial stocks also fell overall, putting heavy pressure on the market. Commonwealth Bank lost 2.4 percent, Westpac lost 2.6 percent, National Australia Bank lost 1.8 percent and ANZ Bank lost 2.1 percent.
However, with the arrival of bottom buyers in the afternoon, mining started to rise. BHP fell as much as 1.9 percent in early trading and ended the session with a 1 percent gain. While Rio Tinto gained 0.3 percent in value, Fortescue lost 0.3 percent.
Gold rose as much as 1.1 percent in choppy trading as it reversed a similar-sized slide to near $4,000 an ounce at the start of the session.
Northern Star fell 1.2 percent as activist investor Elliott Investment Management stepped up pressure on the country’s biggest gold producer, urging the beleaguered miner’s board to act quickly and reconsider the sale amid a drop in market value. Newmont lost 3.5 percent and Evolution Mining was up 2.1 percent in early trading.
Defensive stocks again performed well amid the market’s risk aversion sentiment; biotechnology giant CSL gained 4.2 per cent, while the country’s biggest supermarkets Woolworths and Coles gained 1.2 per cent and 1.6 per cent, and bottle shop owner Endeavor closed up 1 per cent.
Southern Cross Media shares fell 4.2 per cent after the company, which emerged from the merger of Kerry Stokes’ Seven West and radio group Southern Cross, announced a profit downgrade and major job cuts as market conditions continued to deteriorate. On Wednesday, this imprint heralded the cuts.
Lend Lease rose 4.6 per cent after the property developer reaffirmed earnings forecasts and appointed former Macquarie and current AustralianSuper executive Nick O’Neil as CEO to replace Tony Lombardo, who will step down by the end of the month.
The S&P 500 fell 1.6 percent overnight, its first back-to-back decline in three weeks and back to its level in early May. The Dow Jones fell 953 points (1.9 percent) and the Nasdaq composite fell 2 percent, leading the market lower.
Softer than expected inflation data provided brief relief. As investors continue to price in higher U.S. interest rates, a selloff in richly valued technology stocks has raised doubts about the longevity of the record rally in stocks.
Wall Street has been shaky since last week, when AI stocks went from soaring to record highs to precipitously falling. Concerns include prices going too fast and too high due to the artificial intelligence craze. The question now is: Has this decline wiped out the over-optimism that may have affected stock prices, or is it the beginning of a longer downturn?
“Investors remain skittish despite inflation numbers becoming a lifeline,” said Chris Beauchamp, chief market analyst at IG. “It’s now a ‘once bitten, twice shy’ situation; no one wants to rush in to buy the dip yet, leaving the overall trend intact but pointing to a lower decline for now.”
Super Micro Computer, which sells artificial intelligence servers, fell 28 percent after announcing late Tuesday that it plans to raise $US7 billion ($10 billion) in cash through the sale of stock and convertible preferred stock. Such moves make companies the most money when stock prices are high and can dilute existing shareholders’ ownership stakes.
Micron Technology turned from an initial loss of about 4 percent to a modest gain and then a loss of 4.7 percent. The result comes after a rocky period in which the company fell 7.7 percent last Thursday, then fell another 13.3 percent on Friday and rose 9.9 percent on Monday. Despite the swings, shares of the computer memory maker are still up 212.5 percent so far.
Nvidia, the chip company that has become a nearly $4.9 trillion ($7 trillion) giant due to the artificial intelligence boom, was the S&P 500’s heaviest weight after falling 3.7 percent. In second place was AI winner Broadcom, with a decrease of 5.1 percent.
Some of the pressure on AI stocks may also be due to investors pulling cash to prepare for the high-profile debuts of various AI giants, including SpaceX, on the US stock market.
The weakening of stocks of companies with large fuel bills also pulled the market down. After oil prices increased due to the latest war with Iran, United Airlines fell 6.2 percent and cruise operator Carnival fell 6.3 percent.
But in the bond market, Treasury yields still remained relatively stable because the numbers were exactly as economists had predicted. Meanwhile, the rise in a key key measure of inflation from April to the end of May was not as bad as economists had expected.
The yield on the 10-year Treasury note rose to 4.54 percent from 4.53 percent on Tuesday. The two-year Treasury yield, which more closely tracks expectations for what the Federal Reserve will do with overnight interest rates, remained at 4.13 percent.
Investors have been placing bets lately that the Fed will have to raise its key interest rate at least once this year, given how high inflation is and how strong the U.S. job market is. Wednesday’s inflation update didn’t impact them much, according to data from CME Group.
High yields could slow the entire economy and drive down the prices of all kinds of investments, including stocks and cryptocurrencies. They have particularly hit investments seen as the most expensive, and some critics have characterized AI as a bubble in which investment has inflated too much.
In other international markets, indices in Europe followed a mixed course following the sharp declines in Asia.
