ASX extends losses after Tuesday’s $60b sell-off; Webjet soars, banks fall

The Australian sharemarket stayed on edge after Tuesday’s $60 billion sell-off as US stocks suffered another jarring session overnight, with the S&P 500 index posting its longest slide since August amid fears share prices shot too high in the artificial-intelligence frenzy.

The S&P/ASX 200 dropped another 21.2 points, or 0.25 per cent, to 8447.90 amid a slower pace of trading as investors await the earnings of AI giant Nvidia on Thursday morning, viewed as a bellwether for if the market got carried away in its expectations for the technology.

While the tech sector bounced up and down and mining and property stocks finished higher, banks extended their declines. The Australian dollar was down 0.3 per cent at US64.86¢ at 4.51pm AEDT.

The jittery market comes after the S&P/ASX 200 slumped 1.9 per cent on Tuesday, hitting a five-month low in its biggest sell-off since Donald Trump shocked the market with his Liberation Day tariffs announcement in April.

Webjet Group shares rallied 16.6 per cent to 88¢ after travel agency group Helloworld lobbed a takeover offer for the company at 90¢ a share. The bid comes after Webjet’s shares plummeted last week, after it issued a profit warning, blaming an “ongoing subdued trading environment” in leisure travel. Helloworld, which already owns a 17.3 per cent stake, rose 1.7 per cent.

TPG shares fell 1.8 per cent on the telco’s first day of trading after it revealed a person died as a result of a Samsung device running outdated software that was unable to connect to Triple Zero emergency services. The stock was halted from trade since Monday as the company was raising $300 million selling new shares to institutional investors. TPG had planned to raise as much as $550 million.

KMD rose 2.1 per cent after the outdoor apparel retailer said its sales rose 7.9 per cent in the first quarter, boosted by a 13.9 per cent uptick in sales at its key Kathmandu brand.

Gold miners bolstered the mining sector despite wavering gold prices, with spot prices edging up 0.5 per cent to $US4073.50 an ounce. While gold often performs well when investors seek haven from market turmoil, it can also suffer in the short term as traders are forced to unwind leveraged positions. Gold has gained more than 50 per cent this year and remains on course for the best annual gain since 1979. Shares of Northern Star Resources rose 2.9 per cent, Evolution Mining gained 2 per cent, while Newmont added 1.3 per cent and Perseus Mining rose 2.3 per cent.

Iron ore heavyweight Fortescue Metals added 1.6 per cent. Rare earths miner Lynas – the only producer of so-called heavy rare earths outside China – climbed 5.6 per cent after UBS raised the stock to “buy,” saying the western world’s “move to decouple rare earths supply chains away from China remains in motion” even after China paused its export restrictions.

Energy stocks were also higher after oil prices rose overnight as hawkish rhetoric by the European Union’s top diplomat Kaja Kallas raised expectations that sanctions on Russia will tighten. Oil and gas giants Woodside and Santos rose 1.2 per cent and 0.8, respectively.

However, banks continued on their losing streak and heavily weighed on the bourse. CBA, the nation’s biggest stock, was down 1.3 per cent, Westpac slipped 1.4 per cent, National Australia Bank dropped 0.7 per cent and ANZ Bank lost 2 per cent. ‘Millionaires Factory’ Macquarie Group fell 1.4 per cent. Even small moves of the banking sector bear weight on the local market as financial stocks make up more than a third of the ASX.

And while the tech sector briefly bounced up from its 6 per cent slump on Tuesday, it finished lower again as most of its stocks continued to wobble. Software makers WiseTech Global and Xero edged up 0.4 per cent and 0.3 per cent, respectively, while AI data centre operator NextDC slipped another 0.3 per cent. A 1.1 per cent rebound in warehouse and data centre owner Goodman Group and a 2 per cent rise in shopping centre landlord Vicinity boosted the property sector.

Embattled defence company DroneShield plummeted 19.6 per cent after saying its US chief Matt McCrann resigned “with immediate effect”. The US is one of the counterdrone company’s key markets. DroneShield has lost 49 per cent of its market value this month amid revelations that founder Olek Vornik sold all of his shares for $49.5 million.

On Wall Street overnight, the S&P 500 fell for a fourth day, sliding 0.8 per cent after dropping as much as 1.5 per cent earlier in the session. The Dow Jones lost 1.1 per cent, and the tech-heavy Nasdaq 100 Index fell 1.2 per cent — leaving it down 6 per cent from its October peak.

“Fears are growing that the AI trade can’t keep up with the momentum,” said Eric Beiley, executive managing director of wealth management at Steward Partners. “Nvidia will need to reassure investors that these lofty valuations are warranted otherwise the stock market could be in for further declines.”

Technology stocks were again the biggest weights on the US market. A basket of the Magnificent Seven companies declined 1.8 per cent. Amazon and Microsoft fell 4.4 per cent and 2.7 per cent, respectively.

Nvidia was one of the heaviest weights on the market, and its latest drop of 2.8 per cent brought its loss for the month so far to more than 10 per cent. That’s a steep enough fall that Wall Street has a name for it: a correction.

What Nvidia does matters disproportionately to savers’ retirement accounts because it’s the most influential stock on Wall Street due to its immense size. It single-handedly steers the direction of the S&P 500 some days, after fervent demand for its artificial-intelligence chips helped it briefly top $US5 trillion in total value. Its price more than doubled in four of the last five years.

Many big investors still seem to be expecting stock prices to rise further, according to the latest monthly survey of global fund managers by Bank of America Global Research. But when asked what the No. 1 risk for the market is, one with a lower probability of happening but a chance of very big damage, 45 per cent pointed to an AI bubble. That beat out potential trouble in the bond market, inflation and trade wars.

A record percentage of investors is also saying companies are “overinvesting,” according to the survey. The worry is that all the dollars pouring into AI chips and data centres worldwide may not produce the kind of profits that AI proponents have been predicting.

Elsewhere on Wall Street, Cloudflare fell 2.8 per cent after an earlier issue at the internet infrastructure provider had caused global outages for ChatGPT and other services.

with AP and Bloomberg

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