The share prices of companies listed on the Australian Securities Exchange are expected to plunge on Friday after falling expectations of lower interest rates left stocks sharply lower in the United States overnight.
The Australian Securities Exchange (ASX) is likely to dive by 1.5% when it opens at 10 am AEDT (11 pm GMT Thursday), according to futures trading with the December S&P/ASX 200 share price index contract quoted 139 points below its previous settlement at 8,639 points, at the time of writing.
The direction of the ASX was set on Wall Street, where the three main price indices closed lower with technology giants down sharply on concerns about artificial intelligence-inflated valuations and as investors reduced expectations of interest rate cuts due to concerns about inflation and the state of the U.S. economy.
The S&P 500 and Dow Jones Industrial Average each dived 1.7% and the Nasdaq Composite plunged 2.3% on Thursday (Friday AEDT).
"There's a lot of uncertainties about the state of the economy. What we're going through is a little bit of a correction in the market in the AI sector and we're seeing market rotation," Spartan Capital Securities Chief Market Economist Peter Cardillo was quoted as saying in a Reuters article.
Burrell Stockbroking wealth adviser Adam Dight said 80% of global fund managers had underperformed their benchmarks this year.
“It’s in their interests to throw some doubt on something that’s killing them,” he said.
“Suddenly psychology kicks in and everyone’s saying ‘I don’t want to be the last to hit the door’.”
He said the fall represented a buying opportunity with the market likely to rebound, particularly if rates were cut in the U.S., and Nvidia issued strong results next week and given the $7 trillion of cash would have to be deployed in the market eventually.
“I don’t think the drawdowns will be that bad,” Dight said.
The Australian sharemarket fell on Thursday after lower than forecast unemployment data lowered the likelihood of another interest rate cut from the Reserve Bank of Australia next year, with the S&P/ASX 200 losing 0.5% to 8,753.4 points.
In fixed interest markets, yields in Australian Government bonds continued to rise, with rates on two-year paper gaining 2.16% to 3.728% and 10-year rates adding 1.46% to 4.447%.
