Good morning and welcome to the ABC’s finance blog! I’ll be your guide for the next few hours, in what looks to be a chaotic day for markets.
The Australian share market is likely to start its day with sizeable losses, given ASX futures are down 0.7%.
It comes after a frenzied sell-off on Wall Street, driven by steep falls in the price of artificial intelligence (AI), tech and software companies.
Investors are essentially selling down their holdings of AI-related stocks like Nvidia (-4.3%), Microsoft (-3%), Meta (-2.8%) and Amazon (-2.5%), which are arguably overvalued.
It appears many have chosen to pile into stocks that are associated with an economic recovery — for instance, Walmart (+2.6%), Caterpillar (+1.2%) and Johnson & Johnson (+1.5%). So there’s definitely a rotation going on.
This led to the S&P 500 dropping 1.1% while the tech-heavy Nasdaq Composite fell almost 2%, by 3:30pm (local time).
Crypto sell-off
There were also signs of a meltdown in ‘cryptoland’ with the price of bitcoin falling to a 16-month low — or the weakest it has been since November 2024, to be precise.
That means bitcoin has wiped out all its gains since pro-crypto Donald Trump won the US election (the second time).
It was down more than 6% at one stage, trading as low as $US72,885 at its lowest point overnight.
Since then, bitcoin has come off its lows to be down 3.2%, at $US75,930 — a far cry from its record high of around $US124,000 back in October.
Basically, the common theme is that risky assets like cryptocurrencies, AI and tech stocks have risen so much in recent years that people have decided now is a good time to cash out.
Given the mounting geopolitical concerns (ie related to Donald Trump’s erratic policy shifts and trade wars), and the delayed release of crucial US economic data due to the partial government shutdown, no wonder the mood has turned negative or “risk-off”.
Anyway, I’ll have more updates for you shortly. Go enjoy your coffee, tea (or whatever you drink) before it gets cold!