NZX set for cautious start amid tumbling commodities, Wall Street tech jitters

New Zealand and Australian markets face a cautious to the day as tumbling gold prices are set to weigh on the resources-heavy ASX, while investors remain cautious about the artificial intelligence trade ahead of semiconductor firm Micron Technology’s looming earnings result.

Wall Street was broadly weaker with tech stocks on the red side of the ledger, although cheaper oil provided a lift for carriers such as American Airlines and United Airlines and the Dow Jones Industrial Average extended gains with retailers and manufacturers leading the blue-chip index.

Still, South Korea’s SK Hynix – which is vying with Samsung Electronics for the crown of the nation’s biggest listed company – plans to raise 45.45 trillion won in a New York listing to help fund its AI expansion plans.

And locally, property developer Winton Land is poised to make a statement about its leadership after halting trading of its stock late yesterday, while the Reserve Bank is due to release its monthly mortgage lending figures.

Hard commodities

Brent crude oil futures dropped 4.7% to US$73.49 a barrel at 7am in Auckland and gold futures were down 3.7% at US$3,998 an ounce amid growing expectations the Federal Reserve will start raising interest rates to tame any signs of inflation, even as oil tankers flow freely through the Strait of Hormuz.

The greenback has been rallying on the prospect of a more hawkish Fed, although bond traders remain less convinced, with the yield on US 10-year treasuries sliding 10 basis points to 4.4%. The kiwi traded at 56.40 US cents at 7am from 56.67 cents yesterday.

“The market now fully prices a Fed hike by October and 41 basis points of hikes by March, the peak in rate pricing, representing a further paring from earlier in the week,” Bank of New Zealand senior market strategist Jason Wong said in a note. “However, another notable fall in oil prices may well be the bigger factor driving US treasury yields lower, led by the long end.”

The slump in oil prices provided a boost for carriers such as American and United airlines, setting a strong lead for the likes of Air New Zealand and Qantas Airways, while manufacturers Sherwin-Williams and 3M and retailer Home Depot led the Dow higher, which was up 0.4% in late trading.

That was in contrast to the ongoing jitters about the tech sector, with the Nasdaq Composite sliding 0.8% ahead of Micron’s quarterly result, which is seen as the next gauge of the mammoth AI capital spending programme.

Still, South Korea’s SK Hynix plans to pursue a US listing to raise US$29 billion of fresh equity to fuel its AI spending programme in what would be on a par with Saudi Aramco’s 2019 initial public offering.

Bitcoin sank 4.5% to US$59,501 amid the heightened nervousness, while treasury firm Strategy dropped 9.3%.

Across the water

European markets were mixed with the UK’s FTSE 100 up 0.3% and France’s CAC 40 advancing 0.5%, while Germany’s DAX dropped 0.6% with ammunition maker Rheinmetall slumping almost 19% after the German government dumped plans to build six frigates, preferring a cheaper option.

The gold price slump is set to weigh on Australia’s resources-rich market, pointing to a 0.4% decline for the S&P/ASX 200 index when trading opens across the Tasman.

Greg Boland, market strategy consultant at Moomoo, said investors continued to move out of tech stocks and into industrial and consumer companies amid the renewed concerns about AI spending programmes.

“With oil prices falling, bond yields easing and Wall Street broadly stable outside of technology, the NZX is expected to open mixed as investors balance improving inflation signals against continued weakness in global growth and AI-related stocks,” Boland said in a note.

Locally, property developer Winton is set to make an announcement on its leadership after halting trading of its stock late yesterday. Chair and chief executive Chris Meehan took the firm public in late 2021, and an escrow on the majority of his controlling stake lifted in February.

Eroad is also due to announce the final results from yesterday’s annual meeting, where New York hedge fund Ampfield Management sought to oust the board and install its own nominees.

The Reserve Bank is due to release monthly mortgage lending figures today, while employment figures are on the calendar across the Tasman. The kiwi dollar traded at 81.90 Australian cents from 81.86 cents yesterday.

Reporting by Paul McBeth. Image from Dominik Vanyi on Unsplash.