ASX futures tentative after Wall Street’s AI rout; RBA looms
Westpac first up in Australian bank reporting season.
Australian futures are pointing to a tentative start to the trading week, following a rout on Wall Street as earnings from Intel and Amazon reignited fears about the pace of spending on artificial intelligence infrastructure.
Crypto-related stocks such as Coinbase and Strategy tumbled on Friday after the Binance hack of US$6.3 billion of assets, which the US Federal Bureau of Investigation linked to North Korea, while Bitcoin nudged higher as the crypto exchange said it covered 95% of the stolen assets.
US midterm elections are hanging over the upcoming week, with Polymarket pricing pointing to the Democrats winning control of both the Senate and the House of Representatives, while New Zealand’s tight general election on Saturday continues to cloud the domestic market.
And Westpac Banking Corp kicks off annual results from three of Australia’s big four banks today, with a sluggish housing market expected to weigh on the lenders, while the Reserve Bank of Australia is predicted to hike its cash rate on Tuesday.
Nervous markets
Stocks on Wall Street slumped on Friday as fears over the AI infrastructure build’s ability to convert into earnings were reignited by disappointing results from Amazon and Intel, the latter of which tumbled 29%.
The tech-heavy Nasdaq Composite sank 2.9%, while the S&P 500 declined 1.8% and the Dow Jones Industrial Average fell 1.1%, led lower by Nvidia, Caterpillar and Cisco Systems.
Meanwhile, the Financial Times reported that OpenAI cut its funding target by US$10 billion to about US$20 billion, valuing the ChatGPT developer at US$1.25 trillion.
Investors are still waiting on Anthropic to set the price and valuation for its initial public offering, having filed its offer documents with the US Securities and Exchange Commission last week, while earnings this week from Apple, Advanced Micro Devices and Qualcomm are among those to test the AI theme.
“Investors are balancing strong reported earnings against expensive AI investment, higher oil prices and uncertainty over interest rates,” Moomoo market strategy consultant Greg Boland said in a note. “The next few weeks will test whether corporate earnings can support equity valuations.”
US crypto-linked stocks were also weaker on Friday as investors digested the Binance hack linked to North Korea. The crypto exchange since said it had covered 95% of the stolen assets, and that a spike in withdrawals after it lifted the temporary suspension had subsided. Crypto analytics platform DefiLlama showed an outflow on Sunday of US$4 billion on the Binance exchange.
Bitcoin clawed back some of its losses, up 0.7% at US$77,935 at 7am in Auckland.
An Irish twist
European markets avoided the worst of the US slide, with data showing eurozone gross domestic product grew at a faster pace than predicted, much of which was driven by Ireland.
Germany’s DAX fell 0.9% and France’s CAC 40 was marginally weaker, while the UK’s FTSE 100 increased 0.1%.
Fitch Ratings put France’s A+ credit rating on a ‘negative’ outlook, warning that its deteriorating fiscal position and fragmented politics threatened efforts to get national debt under control.
Brent crude oil futures – which rolled over to the January contract – rose 1.9% to US$112.33 a barrel heading into the weekend. The Organization of the Petroleum Exporting Countries agreed to keep production steady in December amid concerns the US could resume strikes on Iran after this week’s midterm elections.
ExxonMobil and Chevron both beat quarterly earnings expectations, as supply disruptions boosted margins for the energy giants.
Polling in the upcoming US midterm election indicates the Democrats would likely take control of the House of Representatives on the Nov 3 vote, with the Senate a closer race. Polymarket bets are pricing in a 95% chance of the Democrats winning control of the House and a 72% chance of securing the Senate.
Australian futures are pointing to a marginally weaker start to the trading day for the S&P/ASX 200 index, which rose 1.4% in October.
The RBA is expected to hike the target cash rate a quarter point to 4.85%, which would be the benchmark’s highest level in 18 years.
Australian lenders are expected to be knocked by the housing slowdown across the Tasman, with Westpac due to report its annual result today. National Australia Bank is scheduled for Thursday, while ANZ Group Holdings is on the calendar next Monday.
No local data are due today, with New Zealand’s general election continuing to keep local investors on the sidelines as polling continues to show no clear outcome.
The kiwi dollar traded at 56.35 US cents at 7am in Auckland from 56.41 cents on Friday.
Reporting by Paul McBeth. Image from Slejven Djurakovic on Unsplash.
