ASX Predicted to Open Slowly Following Wall Street Declines

The Australian share market is anticipated to have a slow start on Wednesday morning after Wall Street experienced declines overnight. This comes even after positive economic and employment reports from the United States.

Market Expectations

ASX 200 futures indicated a 0.1% dip at 8:30 a.m., suggesting a decrease of 10 points to an expected level of 8259. On Tuesday, the local market had finished on a positive note, rising by 0.3% and marking its fourth consecutive day of gains.

US Market Trends

In the United States, the S&P 500 index decreased by 1.1% after initially showing gains. The Dow Jones Industrial Average fell by 178 points, or 0.4%, while the Nasdaq composite index saw a larger decline of 1.9%.

Economic Reports Impact

The drop in stock prices was largely influenced by rising yields in the bond market, which surged following the release of two favorable economic reports. One report indicated that US employers were advertising more job openings at the end of November than analysts had anticipated. Another report showed that activity in finance, retail, and other service sectors expanded much more quickly than expected in December.

Inflation Concerns

While these strong economic reports are encouraging for job seekers and those worried about a potential recession, they also raise concerns about persistent inflation. A robust economy could lead the Federal Reserve to hesitate in reducing interest rates, which is a prospect that many investors are keen on.

Bond Yields Rise

Expectations for fewer interest rate cuts in 2025 have gained traction over the past few weeks, causing long-term Treasury yields to climb. Concerns about potential policies, including tax cuts, that could increase US government debt have also contributed to rising yields. Higher yields make Treasury bonds more appealing compared to stocks, which applies pressure on stock prices.

Big Tech Performance

High yields particularly affect expensive stocks, putting pressure on major technology companies like Nvidia. Nvidia had been poised to reach another all-time high during the morning session after its CEO, Jensen Huang, announced new products and partnerships focused on the growth potential of AI technology. However, following the release of the economic reports, Nvidia's shares plummeted by 6.2%, becoming a significant drag on the S&P 500 index, accompanied by losses from Amazon, Tesla, Apple, and Microsoft.

International Market Impact

On the international front, some Chinese companies saw declines after the US Defense Department added them to a list of entities it claims have connections to China's military. Companies such as Tencent, artificial intelligence firm SenseTime, and the battery manufacturer CATL faced significant stock drops, with Tencent's shares falling by 7.3% and contributing to a 1.2% drop in the Hang Seng Index. However, other markets in China and across Asia and Europe showed stronger performance.

ASX, WallStreet, Economy