Markets Overview
- ASX SPI 200 futures down 0.3% to 8,003.00
- Dow Average down 0.4% to 41,091.42
- FTSE 100 little changed at 8,343.85
- Euro down 0.6% to $1.1120
- Aussie down 0.1% to 0.6785 per US$
- Kiwi little changed at 0.6246 per US$
- US 10-year yield rose 1.5bps to 3.8368%
- Australia 3-year bond yield rose 3.9 bps to 3.55%
- Australia 10-year bond yield rose 2 bps to 3.93%
- Gold spot down 0.8% to $2,504.66
- Brent futures down 1.4% to $78.47/bbl
Economic Events
- 10:30: (AU) Australia to Sell A$1 Billion 84-Day Bills
- 10:30: (AU) Australia to Sell A$1 Billion 168-Day Bills
- 11:30: (AU) 2Q Private Capital Expenditure, est. 1.0%, prior 1.0%
Tech got hit in late trading as Nvidia Corp.’s sales forecast disappointed some hoping for more from the chipmaker at the forefront of the artificial-intelligence revolution that has powered stocks.
A $286 billion exchange-traded fund tracking the Nasdaq 100 (QQQ) lost 1% after the close of regular trading. Nvidia sank 7% after saying third-quarter revenue will be about $32.5 billion. While analysts had predicted $31.9 billion on average, estimates ranged as high as $37.9 billion. The company also signaled that it was working through production snags with its highly anticipated new Blackwell chip.
“Here’s the issue: the size of the beat this time was much smaller than we’ve been seeing,” said Ryan Detrick at Carson Group. “Even future guidance was raised, but again not by the tune from previous quarters. This is a great company that is still growing revenue at 122%, but it appears the bar was just set a tad too high.”
On the flip side, Nvidia’s revenue more than doubled to $30 billion in the fiscal second quarter, which ended July 28. And the Santa Clara, California-based company’s board approved an additional $50 billion in stock buybacks.
To Ido Caspi at Global X ETFs, the share-repurchase announcement speaks to management’s continued commitment to profitable growth as the Blackwell transition takes place.
“While revenue growth has decelerated, 122% growth at Nvidia’s scale is still significant and speaks to a robust AI investment environment,” Caspi noted.
In the run-up to the results, a renewed bout of volatility gripped stocks. The S&P 500 — at one point — headed toward its worst drop since the Aug. 5 meltdown. The gauge pushed away from that threshold, closing down 0.6%. The Nasdaq 100 slid 1.2%. Wall Street’s favorite volatility gauge — the VIX — surged to around 17.
Treasury 10-year yields rose two basis points to 3.84%. Bitcoin dipped below $60,000.
Other News
Australia’s banking regulator plans to stress test the nation’s financial sector to shed more light on the impact of private credit capital flows on other market segments.
“Private credit is a new and emerging risk that we are looking at,” said John Lonsdale, chair of the Australian Prudential Regulation Authority (APRA) at a media conference in Sydney on Wednesday. “We want to work on more transparency in this area and we’ve signaled that already there is quite a lot of opaqueness.”
Private credit is one of the hottest growth areas in financial markets right now with the investment class considered as an alternative to bond and loan markets where banks act as intermediaries. APRA plans to conduct a cross-industry stress test to track “the linkages between the different sectors and how private credit might flow,” Lonsdale explained.
The agency joins the Australian Securities and Investments Commission in increasing scrutiny on private markets as growing guardrails imposed by regulators elsewhere are put in place to manage potential risks. Private credit made up over 10% of Australia’s A$1.4 trillion ($950 billion) corporate debt market in 2023, according to restructuring firm Alvarez & Marsal Inc., a share Lonsdale sees as “significant.”
APRA is also looking at “strategic asset allocation” and the exposure the country’s A$4 trillion pension pool has to private credit. Australian private-credit opportunities were previously limited mainly to super and pension funds due to high barriers to entry, but they are now becoming more accessible to individuals, wealth management firm JBWere said earlier this month.
Potential risks are “being discussed in international forums,” Lonsdale added. “We attend the Basel Committee and it’s an issue being looked at there. The same can be said at the Financial Stability Board.”
(Bloomberg)
