ASX wobbles despite gains on Wall Street; Banks fall, the Star soars

The Australian sharemarket had a muted start to trading on Tuesday, despite a strong lead from Wall Street which had been buoyed by the IPO filing of Anthropic, a tent pole of the AI industry.

The S&P/ASX 200 was down 11.8 points, or 0.1 per cent, at 8798.10 at around 10.30am AEDT, with four of its 11 industry sectors in the red. It had added 0.2 per cent on Monday. The Australian dollar was trading at US70.15¢.

Losses by banks and consumer stocks weighed on the local market, while the mining heavyweights and the tech sector advanced on the global AI trade. Energy stocks also rose.

While the price for a barrel of Brent crude slipped 0.8 per cent to $US115.81 in the morning, it remains near the high end of its range since the war with Iran began. The highest price for the fossil fuel since then is nearly $US120, reached in March.

On Wall Street overnight, US stocks climbed as investors digest Anthropic’s filing for its initial public offering and look ahead to key big tech earnings this week.

The S&P 500 rose 0.7 per cent and more than recovered its losses from last week. The Dow Jones Industrial Average added 0.3 per cent, and the Nasdaq composite closed 0.8 per cent higher.

Anthropic filed for its long-awaited market float, a landmark moment in the artificial-intelligence industry that is growing ever-hungrier for cash to power ahead.

The company behind Claude expects to begin trading on the Nasdaq Global Select Market under the symbol ANT, a filing with the US Securities and Exchange Commission showed. Anthropic filed confidentially in June for a listing.

Investors are telling bankers on the deal that their estimate of a fair valuation has shifted down to around $US1.4 trillion to $US1.5 trillion ($2 trillion to $2.1 trillion) after the company’s investor day, according to people familiar with the matter. A valuation of closer to $US1.75 trillion is potentially achievable, some of the people said, asking not to be identified as the information isn’t public.

Microsoft closed 1.5 per cent higher after it announced it will offer buyouts to about 60,000 workers, part of the company’s efforts to trim costs and retool its workforce for the artificial intelligence era. Some personnel in the US, Canada, India and the UK at a vice president level and below will be eligible, said a Microsoft spokesperson.

The strongest lift for the market came from Nvidia, which rose 2.4 per cent. That helped the chip company recover some of its drop from three straight losing weeks, its longest such streak since June, and maintain its position as the largest stock on Wall Street above Apple.

But stocks elsewhere in the artificial-intelligence industry remained unsettled. They’ve been swerving on worries about whether their industry’s boom is under threat because of how expensive it’s become for companies to borrow money to build data centres and buy more AI chips.

Stocks are recovering their losses from last week ahead of a number of earnings reports this week from big companies, including Amazon and Intel.

Meta Platforms bounced up and down after outlining plans to raise $US35 billion by selling stock to help pay for its AI investments. It also said it could raise another $US60 billion by selling shares of a new class of its stock once it begins trading. Meta’s stock initially dropped more than 2 per cent, but it quickly flipped to a gain and then pulled back to a loss of 1.9 per cent.

Meta said Nvidia, Advanced Micro Devices and Broadcom have already indicated they may buy a total of $US5 billion of stock in its offering. That’s a signal of strong interest from big chip companies that stand to benefit from additional AI investments. But it also gives fuel to critics of “circular financing” who say it raises the risk if AI isn’t as successful as expected.

SpaceX, Elon Musk’s rocket company that also runs the xAI business, had similar swings. It opened with a loss and then flipped to a gain of 0.4 per cent after it agreed to a roughly $US40 billion deal with an entity managed by Apollo Global Management to lease AI computing power.

Musk warned over the weekend that hundreds of companies that rent out AI computing power are under threat because of the difficulty in borrowing money, saying on his social-media platform, X, that they could face “guppy-level death and consolidation.”

CoreWeave, a company that’s borrowed money to buy AI computing power that it rents to customers, has been at the centre of investors’ worries in recent weeks. On Monday, it dropped 5.5 per cent quickly after trading began, only to flip to a gain of 1.8 per cent by the close. Such minute-to-minute swings have become commonplace for it in recent days.

Profit reports from huge tech companies this upcoming week could offer more details about how spending on AI is going, and whether it’s producing the profits and productivity that proponents promised.

Alphabet and Microsoft will report their latest quarterly results on Wednesday, with Amazon to follow on Thursday.

Companies across all industries are under pressure to report strong growth in their profits. Expectations for big growth are what allowed their stock prices to run to records recently despite worries about high inflation, high interest rates and other concerns.

Verizon Communications fell 3.5 per cent even though it reported a stronger profit for the summer than analysts expected, as its revenue fell short of forecasts.

Roughly one out of every three stocks in the S&P 500 is scheduled to report its latest quarterly results this week.

In stock markets abroad, Brazilian stocks fell sharply, costing the country’s richest bankers about $US9 billion after leftist President Luiz Inácio Lula da Silva won reelection in a result that surprised investors.

Other governments around the world are also feeling pressure because of their high debt loads and worries about strained budgets. France has been at the centre of the worries recently following violent protests in the country.

But yields on French government bonds eased on Monday, and its CAC 40 stock index rose 0.8 per cent for one of the world’s better moves. Indexes also rose in other European markets following a mixed finish in Asia.

The European Central Bank and the Bank of Japan will be meeting to vote on interest rates later this week.

In the US bond market, yields fell for longer-term Treasurys. The yield on the 10-year Treasury fell to 4.98 per cent from 5.00 per cent late on Friday and from more than 5.30 per cent earlier this month.

The two-year Treasury yield edged up to 4.71 per cent from 4.69 per cent late Friday. It more closely tracks expectations for what the Federal Reserve will do with overnight interest rates, and the widespread expectation is that it will say on Wednesday that it is leaving the federal funds rate alone following its latest meeting.

The Fed last month hiked the fed funds rate for the first time in three years in hopes of slowing inflation, which has remained much higher than anyone would like.

with AP, Bloomberg

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