Bad news drags Australian market lower as oil cracks US$100 again

Bad news drags Australian market lower as oil cracks US$100 again

Bad news dominated the Australian share market as Middle East tensions pushed oil prices back above the key US$100 a barrel level and worries about the cost of AI also whacked local technology stocks.

By the Friday close the ASX 200 had fallen 66.7 points, or 0.8%, to 8772.30 points, dragging the weekly result down 0.3% as seven out of the 11 market sectors fell.

Energy stocks, which benefited from the higher oil price, supported the market, saving the local market from an even worse performance.

Trump threatened major reprisals after Houthi attacks

There was no mystery as to how oil returned to triple figures after US President Donald Trump once again threatened to rain massive destruction on Iran after Houthi militants attacked two Saudi Arabian oil tankers in the Red Sea, continuing the disruption of global oil supplies.

However, it was the local technology sector that was hit the hardest after the S&P 500 skidded 1.2% after electric car maker Tesla shares fell 14.5% and Google parent Alphabet lost 6.9% on fears that the cost of artificial intelligence was overwhelming short-term benefits.

Aussie tech follows Wall Street lower In reaction, there was plenty of pain in the Australian technology sector with WiseTech Global (ASX: WTC), Xero (ASX: XRO) and Codan (ASX: CDA) all losing more than 4%.

Other tech stocks fared better, although losses of 3.6% for NextDC shares are hardly consolation (ASX: NXT) to $13.42, or a 3.9% fall in TechnologyOne shares (ASX:TNE) to $27.11 as any consolation. Also better but still far from positive was a 3.3% fall in Megaport shares (ASX: MP1) to $18.47 and a 4.4% fall in Life360 (ASX: 360) shares to $23.07.

Iron ore miners lose ground

There was no consolation to be had in the resources sector either, with the iron ore giants all lower: BHP shares (ASX: BHP) were down 2.9% to $58.85, Rio Tinto shares (ASX: RIO) dropped 1.7% to $160, and Fortescue shares (ASX: FMG) fell 1% to $18.57.

Even the precious metals were in a world of pain as the gold price fell by up to 2.2%, dragging down gold miners as traders surmised that official interest rates would need to rise to cope with the impact of rising oil prices on the economy, provoking a fresh round of inflation. Northern Star shares (ASX: NST) fell 3.9% to $19.93, Evolution Mining shares (ASX: EVN) dropped 2.4% to $11.29, Genesis Minerals shares (ASX: GMD) lost 4.4% to $5.87. The damage continued across the sector, with a 5.6% fall in Perseus Mining shares (ASX: PRU) to $4.76, while Greatland Resources shares (ASX: GGP) dropped 6.4% to $10, and Capricorn Metals shares (ASX: CMM) shed 6.1% to $11.90.

Oil and gas stocks rise. The major upside on the market belonged to Woodside shares (ASX: WDS), up 1.8% to $32.37, while Santos shares (ASX: STO) added 1.5% to $7.97.

Amid all the bleak news was a consolation prize as hearing products company Cochlear (ASX: COH) saw its shares rise 0.5% to $111.61 after announcing that a US government investigation had cleared it, allowing its bionic ear to be imported into the US duty-free.

There was also some good news on the IPO front, with shares in insurance technology company Monvia (ASX: MNV) managing to debut well, closing at $1.12, a modest 1.8% higher than the float price of $1.10.

The Week Ahead

Once again, the earnings numbers from US megatech companies will set the stage for world markets, with four of the Magnificent Seven reporting results.

Microsoft and Meta are the first cabs off the rank on Wednesday, while Apple and Amazon report on Thursday.

It will be interesting to see if Apple’s results justify its recent brief overtaking of Nvidia as the world’s most valuable company.

Investors seem to have changed their tune for the big technology names, rewarding those who are spending less on AI instead of the biggest spenders, so these results and those from a few chip makers will be closely monitored in line with the latest trend.

Apart from the tech hyperscalers, there are plenty of other US companies reporting, including Visa, Coca-Cola, Boeing, S&P Global, UPS, Hilton Worldwide, PayPal, CoStar, Ford, Starbucks, General Dynamics, CBRE, Etsy, Procter & Gamble, Mastercard, Altria, Bristol-Myers, Stryker, KKR, ICE, Live Nation, Yum Brands, Coinbase, AbbVie, Chevron, Eaton, Colgate-Palmolive, Cboe, T Rowe, and Moderna, to name a few.

Lots of local mining reports out

Here in Australia we will have some reporting action of our own with Rio Tinto’s results out on Wednesday and a host of quarterly updates including Stanmore Resources, Aeris Resources, Genesis Minerals, IGO, Iluka, Whitehaven Coal, Atlas Arteria, Liontown, Mineral Resources, Northern Star, Woodside Energy, Nickel Industries, Boss Energy, PLS Group, Perseus Mining, Strike Energy, Vulcan Energy, Champion Iron, Origin, Coronado Global and Fortescue.

Inflation figures are out

On the economic front the big news will all be around inflation with the Consumer Price Index for June out on Wednesday.

These inflation numbers will influence the chances of another official interest rate rise in the future. Meanwhile, the US Federal Reserve will make a decision on interest rates on Wednesday, US time, with most pundits expecting no change to the current rate target of 3.50 to 3.75%.