Weakness in US markets driven by unimpressive tech earnings has infected the Australian market, driving ASX Futures down 1% or 75 points and threatening to reverse much of the progress the bourse has made in recent weeks.
Major tech stocks fall
Five of the seven major tech stocks were in the red overnight.
Tesla (NASDAQ:TSLA) continued its fall, losing 12.3% on reporting its lowest profit margin in more than five years, as well as a missed second-quarter earnings estimate.
Tesla made $1.8 billion in the second quarter of this year, with an automotive gross margin excluding regulatory credits of 14.6% compared to expectations of 16.29% – the company’s lowest profit margin in more than five years.
Alphabet (NASDAQ:GOOGL) surpassed earnings expectations but still slipped 5% as investors raised concerns over slowing advertising growth and high capital expenses. Nvidia dropped 6.8% and Meta 5.6%, with Microsoft (NASDAQ:MSFT) right alongside them, down 3.6%.
The Dow fell 504 points or 1.3%, the S&P 500 2.3%, its first fall of 2% in about 12 months, and the Nasdaq was hammered, plunging 3.6% or 655 points, its steepest fall since 2022.
Former New York Fed president Bill Dudley's call for US rate cuts and the Bank of Canada’s 25 basis points rate cut to 4.50% influenced US government bond yields.
Short and long-dated yields moved in opposite directions, with 2-year yields falling 1 point to 4.43% as 10-year yields rose 5 points to 4.29%.
Share markets in Europe followed the US lead, with technology the hardest hit sector, down 2.4%.
Chip maker supplier ASM fell 9.4% despite raising third-quarter guidance and beating analyst estimates, perhaps signalling a tide shift against semiconductor stocks.
The continent-wide FTSEurofirst 300 index fell by 0.6%, and the UK FTSE 100 slipped 0.2%.
Currencies and commodities
The US dollar strengthened against the Aussie but fell otherwise.
The Euro rose from US$1.0824 to US$1.0840 at the US close, the Japanese yen strengthened from 154.93 yen per US dollar to close near JPY153.90 and the Aussie declined from US$0.6608 to near US$0.6580.
Oil rose after a 3.1% drop in West Texas yesterday, propped up by declining US crude inventories, which fell by 3.7 million barrels compared to expectations of 1.6 million.
Brent rose by US$0.70 (0.9%) to US$81.71 per barrel and US Nymex added US$0.63 (0.8%) to US$77.59 per barrel.
Copper fell 1.1% on rising inventories, it’s lowest point in more than three months, while aluminium lifted 0.3%.
Gold rose again on a weakening US dollar, lifting US$8.40 (0.3%) to US$2,415.70 per ounce. Spot gold traded near US$2,397 per ounce at the US close.
Iron ore futures fell US$0.32 (0.3%) to US$107.47 per tonne, it’s fourth session in the red. A weakening steel market and persistent concerns over Chinese demand are weighing heavily.
On the small cap front
The ASX Small Ordinaries rose 0.37% yesterday to 3,046.50 points, beating the ASX200’s performance handily after the larger bourse fell 0.35%.
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