Market Overview
Global investor sentiment presented a mixed picture as European markets prepared to open, with Asian markets largely gaining ground on renewed confidence in AI-linked technology stocks. This optimism followed better-than-expected US earnings reports from key beneficiaries such as Super Micro Computer and SpaceX. However, persistent inflation concerns, fuelled by surging oil prices amid geopolitical developments in the Strait of Hormuz and hotter-than-expected UK inflation data for September, tempered broader gains. The Australian market demonstrated resilience, managing a slight gain despite hawkish commentary from the Reserve Bank of Australia (RBA) that heightened rate hike bets, alongside significant drops in some large-cap stocks. European equity markets were set to open higher, with Euro Stoxx 50 futures rising 0.2% and Stoxx 600 futures gaining 0.1% in premarket trading.
Markets
Asian equity markets showed a varied performance on Wednesday. South Korea’s KOSPI (^KS11) posted a notable advance, rising 3.06% to 5,722.54. Japan’s Nikkei 225 (^N225) also gained, adding 0.85% to 64,621.24. In contrast, Hong Kong’s Hang Seng Index (^HSI) declined 0.70% to 23,701.43 as of approximately 2:35 pm Hong Kong time, while mainland China’s Shanghai Composite (000001.SS) fell 0.53% to 3,715.76 as of approximately 2:35 pm Shanghai time. Singapore’s Straits Times Index (^STI) gained 0.80% to 5,447.46 as of approximately 2:35 pm Singapore time.
In Australia, the S&P/ASX 200 (^AXJO) closed up 0.16% at 8,831.30 on Wednesday, largely shrugging off local rate hike concerns.
Commodity markets saw Brent Crude (BZ=F) rise 1.35% to $110.26 a barrel, reacting to geopolitical tensions. Meanwhile, the US 10-Year Treasury (^TNX) yield saw a modest decline of -1.90 bp to 5.117% in the previous session.
What Drove Markets
Investor sentiment was shaped by a combination of a revived AI trade, persistent inflation concerns, and specific corporate developments.
AI Sector Revival
Investor confidence in the artificial intelligence (AI) trade was revived following stronger-than-expected preliminary results from US beneficiaries. Super Micro Computer (SMCI) expected quarterly revenue of $18.5 billion to $19.5 billion, well above previous guidance and analysts’ expectations, while SpaceX (SPCX) reported 161% revenue growth in the third quarter. This spurred a significant rebound in Asian chipmakers, with South Korea’s SK hynix Inc. (000660.KS) surging 5.97% and Samsung Electronics Co., Ltd. (005930.KS) climbing 5.20%. Taiwan Semiconductor Manufacturing Company Limited (2330.TW) also rose 0.62%. This resurgence occurred despite recent concerns regarding the sustainability of the AI trade, which had led traders to focus on debt-backed AI investments and whether infrastructure demand justifies companies’ spending.
Inflationary Headwinds and Central Bank Watch
Geopolitical developments reignited inflation concerns, with oil prices rising above $US110 a barrel after Iranian state media reported an unidentified supertanker struck a sea mine in the Strait of Hormuz. This was amplified by UK annual inflation data for September, which rose by a hotter-than-expected 3.5%, its highest level in a year, driven by the surging cost of motor fuels. The previous months had seen inflation at 3.1% in August and 2.9% in July. Domestically, Reserve Bank of Australia Deputy Governor Andrew Hauser warned at the Citi investment conference in Sydney that the central bank faced “hard choices” given inflation was “materially worse” than the RBA’s own forecasts. Following Hauser’s speech, traders ramped up the possibility of a fifth RBA rate rise next month to 57 per cent, up from 27 per cent previously.
Company-Specific Dynamics
While the broader Australian market held firm, company-specific news caused significant volatility. NextDC (NXT) plunged 41.72% after slashing its earnings guidance following power delays at its M3 West Footscray data centre due to community pushback. Major mining giants BHP Group Limited (BHP.AX) and Rio Tinto Group (RIO.AX) also contributed to the ASX 200’s decline, falling 1.61% and 1.48% respectively. In contrast, National Australia Bank Limited (NAB.AX) gained 1.86% and Telstra Group Limited (TLS.AX) rose 1.89%. Woodside Energy Group Ltd (WDS.AX) trimmed its 2026 production outlook despite stronger-than-expected Q3 revenue, with its shares gaining 0.41%. In Asia, China’s Contemporary Amperex Technology (CATL) saw its shares slump after reporting weaker-than-expected third-quarter earnings, reflecting cooling Chinese auto sales and intensifying competition. US electric vehicle maker Tesla, Inc. (TSLA) saw its shares rise 1.54% in the previous session after Elon Musk stated that SpaceX and Tesla have formed special committees to discuss a merger. Goldman Sachs Research’s head of asset allocation, Christian Mueller-Glissmann, noted that earnings support with lighter positioning and lower valuations should help equities into year-end, despite potential near-term volatility from AI concerns, Middle East tensions, and midterm elections.
Stocks to Watch
- NextDC (NXT): Plummeted 41.72% on Wednesday after cutting its earnings guidance due to power delays at its M3 data centre.
- BHP Group Limited (BHP.AX): Shares fell 1.61% to 58.54, contributing to the ASX 200’s mixed performance.
- Rio Tinto Group (RIO.AX): Also declined, down 1.48% to 152.55, reflecting broader pressure on mining stocks.
- National Australia Bank Limited (NAB.AX): Rose 1.86% to 39.93, showing strength among Australia’s major banks.
- Telstra Group Limited (TLS.AX): Gained 1.89% to 4.85, contributing positively to the communications sector.
- Woodside Energy Group Ltd (WDS.AX): Advanced 0.41% to 33.96 despite trimming its 2026 production outlook.
- SK hynix Inc. (000660.KS): Surged 5.97% to 1,296,000.00, leading the rebound among South Korean chipmakers.
- Samsung Electronics Co., Ltd. (005930.KS): Rose 5.20% to 222,500.00, benefiting from renewed AI optimism.
- Taiwan Semiconductor Manufacturing Company Limited (2330.TW): Increased 0.62% to 2,420.00 as part of the broader tech sector recovery.
- Super Micro Computer (SMCI): Shares were up 1.15% in the previous session on stronger-than-expected preliminary revenue figures.
- SpaceX (SPCX): Declined 0.11% in the previous session, but its strong Q3 revenue growth contributed to overall positive tech sentiment.
- Tesla, Inc. (TSLA): Increased 1.54% in the previous session amid reports of merger discussions with SpaceX and ahead of its earnings report.