Australian share prices are set to continue their decline from a five-month low on Wednesday, with Wall Street setting a negative tone, but the extent of the fall will be limited by a range of factors.
The S&P/ASX 200 index is expected to begin 0.1% below the previous close based on Australian Securities Exchange futures trading, which quoted the December contract 10 points under the previous settlement at 8,499 points.
Stocks closed sharply lower in New York on Tuesday as investors awaited the latest quarterly earnings report on Wednesday (Thursday AEDT) from Nvidia amid continuing concerns over stretched valuations for artificial intelligence-related (AI) stocks.
A weaker-than-expected profit forecast from Home Depot also raised concerns about the housing market and the health of the American consumer.
The Dow Jones Industrial Average dropped 1.1%, the S&P 500 gave away 0.8% and the Nasdaq Composite slid 1.2%.
"Investors are sensing that the tenor of the market has shifted," Horizon Investment Services Chief Executive Officer Chuck Carlson was quoted saying in a Reuters story.
"They don't necessarily want to be too bullish on tech in case Nvidia doesn't hit the ball out of the park."
Chief CommSec Economist Ryan Felsman said the ASX could be cushioned from the full impact of the sell-off in New York by higher oil prices, steady outcomes for iron ore and the large index fall on Tuesday.
He noted the ASX200 had fallen 7% since it reached its record high on 21 October.
“We have had another negative lead in from Wall Street overnight, and our markets are not expected to fall as much, mainly because the damage will be contained, by the looks of things, to the tech sector,” Felsman said.
The fall was expected to be less than on Tuesday when the Australian market plunged to its lowest level since 23 June, with the S&P/ASX 200 Index dropping 1.9% to 8,469.10 points.
Stocks to watch include Webjet (ASX: WJL) following the takeover bid from Helloworld (ASX: HLO), A2Milk (ASX: A2M), Medibank (ASX: MPL) and Seek (ASX: SEK), which hold annual general meetings, and Nufarm (ASX: NUF), which is releasing results.
In fixed interest markets, yields on Australian Government bonds maintained their upward trajectory with two-year rates increasing by 0.03% to 3.671% and 10-year rates adding 0.16% to 4.444%.
