The Australian sharemarket is poised for a strong start on Friday, with futures pointing to a gain of 110 points, or 1.2%, after US equities rallied sharply on upbeat technology earnings and renewed enthusiasm for artificial intelligence-related stocks.
Investors will also be watching Australian producer price data and private sector credit figures, along with quarterly updates from Origin Energy, Coronado Global Resources and Fortescue Ltd (ASX:FMG).
ASX retreats as oil and inflation concerns weigh
The S&P/ASX 200 fell 70.9 points, or 0.8%, to 8,967.7 on Thursday, surrendering most of the previous session’s 1% gain, which had followed softer-than-expected Australian inflation data.
Nine of the market’s 11 sectors finished lower, with only information technology and materials ending in positive territory.
The Australian dollar was trading at US69.55 cents as investors assessed rising geopolitical tensions, elevated energy prices and the potential implications for global inflation and interest rates.
Concerns intensified after Houthi rebels in Yemen threatened a blockade of Saudi Arabia, while Saudi forces joined the US in strikes on targets in Iraq linked to Iranian-backed militants.
Maritime security also came into focus after two ships were reportedly struck by projectiles at Egypt’s Mediterranean port of Damietta.
Brent crude remained close to US$90 a barrel after gaining almost 8% in the previous session, when US Central Command said it had completed a fresh wave of strikes against Iranian military targets.
The operation stopped short of targeting bridges, power plants and other civilian infrastructure.
Miners, retailers and property stocks decline
Weakness among mining heavyweights and consumer-facing companies weighed on the benchmark.
BHP Group Ltd (LSE:BHP, ASX:BHP) fell 1.7% and Fortescue lost 1.2%, although Rio Tinto Ltd (LSE:RIO, ASX:RIO, OTC:RTNTF) gained 1.8%.
Gold producers were sharply lower as investors considered whether higher fuel costs could add to inflationary pressures and ultimately force the US Federal Reserve to raise interest rates.
Northern Star Resources Ltd (ASX:NST) dropped 3.3% and Evolution Mining Ltd (ASX:EVN) declined 3.1%. Higher interest rates can reduce the relative appeal of non-yielding assets such as gold.
Consumer stocks also came under pressure. Wesfarmers Ltd (ASX:WES) fell 1.5%, JB Hi-Fi Ltd declined 1.6% and Harvey Norman Holdings Ltd lost 1.8%.
Endeavour Group Ltd dropped 2.3%, The a2 Milk Company Ltd fell 2.8% and Treasury Wine Estates Ltd was down 1.6%.
Real estate investment trusts weakened amid uncertainty about fuel-driven inflation and the outlook for borrowing costs.
Scentre Group Ltd and Vicinity Centres declined 1.3% and 1.5%, respectively, while Charter Hall Group (ASX:CHC) lost 2.8% and Stockland Corporation Ltd fell 2.7%.
Energy and technology stocks buck the trend
Energy companies helped limit the broader market decline as oil prices retained much of Wednesday’s surge.
Woodside Energy Group Ltd (ASX:WDS, LSE:WDS, OTC:WOPEF) rose 0.5%, Santos Ltd (ASX:STO) added 0.8% and Viva Energy Group Ltd climbed 2.2%.
Ampol Ltd edged 0.2% higher after reporting that refinery margins at its Lytton facility had risen to US$30.93 in the latest quarter, compared with US$8.71 a year earlier, amid fuel shortages associated with the closure of the Strait of Hormuz.
Technology stocks also outperformed.
WiseTech Global Ltd surged 6.7%, while Xero Ltd gained 1.4% and TechnologyOne Ltd rose 1.1%, extending their advances from the previous session.
Domino’s Pizza Enterprises Ltd was the standout performer, jumping 9.1% after confirming underlying full-year profit guidance of between $118 million and $122 million.
The company also forecast significantly improved free cash flow, although approximately $300 million of mostly non-cash writedowns is expected to result in a statutory net loss for the year.
Banks mixed as mortgage applications slow
The major banks delivered a mixed performance, helping prevent a steeper market decline.
National Australia Bank Ltd rose 0.9% and Westpac Banking Corporation gained 0.6%, while Commonwealth Bank of Australia (ASX:CBA) edged 0.2% lower and ANZ Group Holdings Ltd declined 0.6%.
NAB told investors that home loan applications had fallen 15% in the June quarter compared with the March quarter, highlighting a slowdown in the mortgage market as property prices weakened.
The update followed Westpac’s disclosure last month that investor loan applications had dropped 20% following government changes to negative gearing and capital gains tax concessions.
Wall Street rallies as Microsoft forecast fuels AI optimism
US sharemarkets advanced strongly as chip stocks surged and Microsoft Corp (NASDAQ:MSFT) recorded its biggest daily percentage gain in 18 years.
Microsoft jumped 16% after forecasting quarterly revenue and cloud growth above market expectations, easing concerns about the scale of spending required to build AI infrastructure.
The Philadelphia Semiconductor Index climbed 8%, led by an 18% rise in Micron Technology Inc (NASDAQ:MU), a 26% surge in Sandisk Corp and a 13% gain for Advanced Micro Devices Inc (NASDAQ:AMD, XETRA:AMD).
Amazon.com Inc (NASDAQ:AMZN) rose 3.9% ahead of its quarterly result, while Apple Inc (NASDAQ:AAPL, XETRA:APC) slipped 1.4%.
Meta Platforms Inc (NASDAQ:META, XETRA:FB2A, SIX:FB) tumbled 8% after reporting a 91% fall in second-quarter free cash flow, highlighting the financial pressure associated with its substantial AI investment program.
Qualcomm Inc (NASDAQ:QCOM, XETRA:QCI) declined 2.6% after forecasting fourth-quarter profit below expectations.
The Dow Jones Industrial Average finished 1.2% higher, the S&P 500 gained 1.7% and the Nasdaq Composite jumped 2.8%.
US Treasury yields rose as investors assessed economic data and the Federal Reserve’s latest policy announcement.
Second-quarter gross domestic product expanded at an annualised rate of 1.5%, below consensus forecasts, while the Personal Consumption Expenditures Price Index increased 3.7% in the 12 months to June, in line with expectations.
The US 10-year Treasury yield rose five basis points to 4.67%, while the two-year yield added one basis point to 4.25%.
European markets supported by banks and industrials
European sharemarkets were mostly higher, supported by strong earnings from financial and industrial companies.
Banking stocks gained 2.6%, with Spanish lender BBVA rising about 5% after reporting an annual increase of more than 11% in second-quarter net profit.
Construction and materials stocks advanced 2.2%.
French conglomerate Bouygues SA jumped 7.1% after reporting first-half core profit well ahead of market expectations.
The gains were partially offset by a 2.8% decline in Airbus SE following its quarterly results.
Rentokil Initial PLC (LSE:RTO) slumped almost 21%, recording its worst one-day fall since 2008 after flagging weakness in its North American business.
The pan-European FTSEurofirst 300 Index closed 0.8% higher, while the UK’s FTSE 100 slipped 0.1%.
Currencies rise as risk appetite improves
Major currencies strengthened against the US dollar as investors moved towards riskier assets.
- The euro rose 0.5% to US$1.1527.
- The Australian dollar climbed 1.1% to US70.28 cents.
- The Japanese yen surged 2.4% to ¥159.49 against the US dollar amid speculation that Japanese authorities had intervened in foreign exchange markets.
The Bank of Japan is due to meet on Friday to decide on interest rates.
Oil eases while metals and gold advance
Global oil prices declined as investors considered proposals for a Saudi Arabia-led maritime coalition aimed at strengthening defence cooperation around the Red Sea.
- Brent crude futures settled 1.9% lower at US$89.03 a barrel.
Base metal prices rose as the US dollar weakened.
- Copper futures gained 2.6% to reach a one-week high, while aluminium futures edged 0.1% higher.
- Gold futures advanced 1.6% to US$4,161 an ounce as the weaker US dollar and softer inflation data supported demand for the precious metal.
- Iron ore futures were unchanged at US$98.25 a tonne.
Looking ahead
In Australia, investors will receive June-quarter Producer Price Index data and June private sector credit figures.
Origin Energy, Coronado Global Resources and Fortescue are also scheduled to release quarterly updates.
In the US, quarterly results are due from AbbVie, Chevron, Eaton, Colgate-Palmolive, Cboe Global Markets, T Rowe Price and Moderna.
