Information technology companies (down 1.8 per cent) were among the weakest on the ASX as the prospect of higher-for-longer interest rates continued to weigh on the sector. Higher interest rates tend to erode technology companies’ price-to-earnings ratios.
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The mining sector (down 1.4 per cent) also suffered losses as iron heavyweight BHP shed 1.4 per cent and lithium miners Allkem (down 5.5 per cent),Pilbara Minerals (down 5.4 per cent) and IGO (down 2.7 per cent) all slipped lower. Financial stocks (down 1.5 per cent) were also weaker,with all four big banks trading in the red.
Shares in market operator ASX Limited fell 2.7 per cent,as shareholders delivered a 21.2 per cent protest vote against the company’s remuneration report at its annual meeting. There was also an 18.9 per cent vote against fund manager Perpetual’s remuneration report.
Overnight on Wall Street,mega-caps drove the market lower,withTesla slumping ahead of results it reported after the close of markets. Morgan Stanley sank the most since 2020 as profit fell due to an investment-banking slowdown. United Airlines lost 9 per cent after warning the Israel-Hamas war and higher fuel costs would weigh on earnings.
The S&P 500 fell 1.3 per cent,while the Dow Jones Industrial Average closed 1 per cent lower and the Nasdaq 100 slumped 1.6 per cent.
“The risks of an escalation have risen on the back of the latest news reports regarding the hospital bombing,” said Jane Foley,head of foreign-exchange strategy at Rabobank. While there have been few signs of panic,“on any clear escalation,we can expect to see a ratcheting up of risk aversion”,she said.
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The outlook for the US economy is stable or may show softer expansion,the Federal Reserve said in its survey of regional business contacts.
Federal Reserve Bank of New York president John Williams said interest rates would have to stay at restrictive levels “for some time” to bring inflation back down to the central bank’s 2 per cent target. Governor Christopher Waller noted policymakers could wait and gather more data before deciding if the economy needed further monetary restraint,signalling he favours holding rates steady next month.
“We just don’t know how long inflation is going to remain elevated,which in turn raises question marks about the longevity of high interest rates,” said Fawad Razaqzada,market analyst at City Index and Forex.com. “Judging by recent data in the US,oil prices and Fed commentary,it can be a long time before the Fed starts cutting rates again.”
There’s been a lot of investor anxiety on whether upside economic surprises could lead the Fed to tighten further,according to Krishna Guha at Evercore. However,he said the recent rise in bond yields,which has tightened financial conditions,meant there was “no urgency for a policy response in November and the Fed can adopt a wait-and-see approach”.
Netflix shares rose as much as 11 per cent in extended trading after the company posted its best quarter for subscriber growth in years.Credit:Sam Mooy
Treasuries pared their slide after strong demand in a 20-year bond auction. With investors seeking havens,gold futures rose 0.3 per cent to $1953.04 an ounce.
United Airlines’ shares fell the most in six months after the carrier warned that the suspension of flights to Tel Aviv and higher jet fuel costs would drag down profit this quarter,well below Wall Street’s expectations.
Adjusted earnings will be $US1.80 a share in the fourth quarter if those flights remain grounded through October 31,United said in a statement,compared with an average $US2.10 from analysts’ estimates. If fighting in the Middle East keeps the ban in place through the end of 2023,the airline’s profit would be as low as $US1.50 a share.
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In positive corporate news,Netflix shares rose as much as 11 per cent in extended trading after the company posted its best quarter for subscriber growth in years,a sign of management’s confidence in the future even as rival streaming services lose money.
The streaming service added 8.76 million customers in the third quarter,far exceeding analysts’ forecasts and boosting its overall subscriber base to 247.2 million. Netflix credited a strong programming slate and its crackdown on password sharing.
With Bloomberg