Wall Street's tech sell-off, the $US6.3 billion theft from Binance and rising oil prices are weighing on sentiment as the Australian sharemarket is poised for a flat open ahead of a week featuring the Reserve Bank's interest rate decision and key corporate results.
Wall Street closed the week sharply lower, with the tech-centric Nasdaq falling 2.9 per cent. More than $US2.6 trillion ($3.7 trillion) was wiped off the market value of big tech stocks last month as the AI trade ran into turbulence. The sell-off was sparked by disappointing results from Intel and Amazon, with Intel shares falling almost 30 per cent and Nvidia more than 4 per cent.
The anxiety persists against a backdrop of strong earnings. J.P. Morgan estimates more than 80 per cent of S&P 500 companies that have reported have beaten earnings-per-share estimates, with earnings growth at 19 per cent year-on-year for those companies. But investors remain concerned about the financing and financial returns needed to support the AI investment theme.
Hackers stole $US6.3 billion ($9 billion) from the world's biggest crypto exchange, Binance, in what analysts believe may be the largest financial robbery in history. Customers withdrew another $US3.6 billion ($5.1 billion) from the exchange. Withdrawal levels are an early test of whether customers still trust Binance. The exchange said withdrawals were stabilising after an initial spike and that it had covered 95 per cent of the stolen assets.
A tanker in the Strait of Hormuz was hit by explosive devices, believed by UKMTO to be limpet mines attached by a small boat. The incident is believed to be the first successful use of limpet mines since the war began in February. Brent crude futures rose 2.4 per cent to $US117.64 a barrel, while gold, once considered a safe haven, fell 3.6 per cent to a one-year low.
The RBA's rate decision on Tuesday is the week's big event. Economists broadly expect the board to raise the cash rate by 25 basis points to 4.85 per cent.
The major bank reporting season began with Westpac posting a $6.8 billion full-year net profit. Chief executive Anthony Miller said the economy was holding up 'relatively well' and that interest rates were likely to 'remain elevated into 2027'. AMP chief economist Shane Oliver revised his outlook for the housing market, expecting a 15 per cent top-to-bottom fall in national average prices. He said the pace of decline was tracking the fastest in the period since 1980.
Investors are bracing for increasing pushback on data centres over their impact on energy costs and the environment. A Democratic sweep could bring more regulatory scrutiny, including for Wall Street banks and crypto firms.
Analysis
Why This Matters
- The RBA rates decision directly impacts mortgage holders and businesses already under pressure from a slowing housing market.
- The US tech sell-off tests the core thesis of the AI-driven bull market, with major implications for global superannuation and equity funds.
- The Binance theft spotlights systemic security and trust issues in the cryptocurrency ecosystem, just as it faces potential regulatory crackdowns.
- Rising oil prices from the Strait of Hormuz strike threaten to add a new layer of inflationary pressure globally.
Background
The US equity market, particularly the Nasdaq, has been heavily driven by optimism around artificial intelligence. This week's sell-off was triggered by disappointing earnings from Intel and Amazon, raising questions about whether the massive capital expenditure on AI data centres can deliver the expected shareholder returns. The Reserve Bank of Australia has been steadily raising interest rates to curb inflation, which remains above its target band. The housing market is already cooling rapidly, with prices declining at the fastest pace in decades. The crypto sector is reeling from a series of hacks, with attackers stealing nearly $US3 billion across roughly 150 incidents last year alone.
Key Perspectives
Oliver Pursche, Wealthspire Advisors: Companies meeting lofty AI expectations are being rewarded, but those 'falling short and seem to be missing the mark or not executing as expected are getting punished'.
Gerard Minack, Investment Strategist: The AI investment boom will end in a bust, as 'the profits on selling AI services will generate a lousy return on the invested capital'.
Anthony Miller, Westpac CEO: The Australian economy is holding up 'relatively well' but rates are 'likely to remain elevated into 2027'.
Shane Oliver, AMP Chief Economist: Expects a 15 per cent fall in home prices, citing more rate hikes, rising unemployment and tax changes on investors.
Tai Wong, Metals Trader: 'The sky is falling' for metals, as a stock correction will pull commodities down with it.
What to Watch
- The RBA board's post-decision media conference for guidance on the future path of rates.
- The outcome of the US midterm elections and the subsequent regulatory outlook for AI and crypto.
- Major bank earnings results from NAB on Thursday and Macquarie on Friday for a read on the financial sector's health.
- Whether stabilising withdrawal volumes at Binance signal a restoration or permanent fracture of customer trust.
Checked
12 claims in this story checked against 1 source: 12 supported.
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- SupportedThe tech rout and Binance theft weighed on sentiment as the ASX faced a week ahead of the RBA rates decision.Just In: “A rout of AI related stocks dragged Wall Street down on Friday, while another rise in oil prices and the massive theft from the world's biggest crypto exchange, Binance, didn't help sentiment.”
- SupportedInvestors faced a busy week of central bank decisions, earnings and elections following Wall Street's AI-related sell-off.Just In: “This week: RBA rates decision, bank results and US jobs”
- SupportedThe ASX was poised for a flat open ahead of the RBA decision and a week of results.Just In: “Westpac has reported a $6.8 billion full year profit as the ASX remains on edge this morning, priced for a flat opening ahead of the RBA rates decision.”
- SupportedWestpac CEO Anthony Miller said the economy was holding up “relatively well” and rates were likely to “remain elevated into 2027”.Just In: “Westpac CEO Anthony Miller says the Australian economy is holding up "relatively well" in a time of global uncertainty. ... "However, inflation remains above the Reserve bank's target range and interest rates are likely to remain elevated into 2027."”
- SupportedThe Nasdaq fell 2.9 per cent for the week’s Wall Street close.Just In: “Wall Street (Friday): S&P 500 -1.8%, Dow -1.1%, Nasdaq -2.9%”
- SupportedMore than $US2.6 trillion ($3.7 trillion) was wiped from big tech stocks’ market value last month.Just In: “Indeed, more than $US2.6 trillion ($3.7 trillion) was wiped off the market value of the big tech stocks last month.”
- SupportedDisappointing results from Intel and Amazon sparked the tech sell-off.Just In: “The tech rout was sparked by disappointing quarterly results from Intel and Amazon released late on Thursday.”
- SupportedHackers stole $US6.3 billion from Binance in a heist analysts believe may be the largest financial robbery ever.Just In: “Having just resumed trading after hackers made off with $US6.3 billion in what's being called the biggest bank heist in history”
- SupportedCustomers withdrew another $US3.6 billion ($5.1 billion) from Binance.Just In: “customers moved with the speed of the hackers themselves to shovel another $US3.6 billion ($5.1 billion) out the door.”
- SupportedBinance said it had covered 95 per cent of the stolen assets.Just In: “The exchange said it had now covered 95% of the $6.3 billion of stolen assets.”
- SupportedA tanker in the Strait of Hormuz was hit by explosive devices believed by UKMTO to be limpet mines, in what is believed to be the first successful use since the war began in February.Just In: “On Friday, a tanker in the Strait of Hormuz was hit by explosive devices, believed to be limpet mines attached by a small boat, according to UKMTO, the British maritime security service. It is believed to be the first successful use of limpet mines since the war began in February.”
- SupportedEconomists broadly expected the RBA to raise the cash rate by 25 basis points to 4.85 per cent on Tuesday.Just In: “there's been furious agreement that inflation is too high and the RBA board will raise the cash rate by 25bps to 4.85%.”
