It was another week where seismic global developments once again drove Australian markets.
Signs of a slowing Chinese economy jangled investor nerves amid renewed conflict in the Middle East as SpaceX's lofty share price began to descend from the stratosphere following its blockbuster initial public offering.
Meanwhile, fresh questions continue to dog the booming artificial intelligence sector.
SpaceX's stellar debut comes back to Earth
SpaceX shareholders who bought into the company’s initial public offering just last month and held on are now likely to be holding a paper loss.
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The Elon Musk-led company launched on the technology-based Nasdaq with much fanfare, becoming the largest sharemarket IPO in history and making Musk the first trillionaire in history.
In a rather unusual move, Australian retail investors were given access to the listing, led by CommSec, which said it received record interest.
While SpaceX's share price soared around 50 per cent in the days that followed, on Thursday it fell to below its US$135 offer price.
Tony Sycamore from IG Markets told the SBS On the Money Podcast "the pressure is stemming from fading post-IPO hype, broader weakness in tech names, and mounting concerns about valuations."
SpaceX has interests in space exploration, satellite communications, and AI technology.
It also follows a sell-off in the broader technology sector this week.
Why China's economy matters to Australia
As Australia’s biggest trading partner, China’s economy is obviously very important to Australia.
That's why it's concerning for Australia that China's economy continues to slow, with official data showing Chinese GDP easing to an annual pace of 4.3 per cent in the latest quarter, which is below the government’s target of 4.5-5 per cent.
China is Australia’s biggest buyer of iron ore, which is used to make steel, and those exports generate significant revenue for the government.
On the upside, it appears that the slowdown hasn’t hindered iron ore production at mining and metals corporation BHP, which this week confirmed it produced a record amount of the material.
Investors, however, weren’t happy about the company’s outlook for copper production, which it says is expected to fall this financial year.
Copper is critical to the energy transition, its conductivity playing a crucial role in the production of electric vehicles. As a result, prices for the soft, malleable metal have surged 35 per cent over the past year.
BHP also had to contend with industrial action at its Port Hedland operations this week.
Markets stay cautious as global risks build
Though the sharemarket fell just 0.1 per cent over the last five trading days, Australian investors continue to be cautious
While the move was modest, it reflected growing uncertainty over several global developments.
Renewed and unpredictable hostilities in the Middle East pushed oil prices higher again, raising concerns that energy costs could lead to yet more inflation spikes around the world.
At the same time, investors welcomed signs that inflation in the United States was easing, falling from 4.2 per cent to 3.5 per cent. This fuelled expectations that the US Federal Reserve may delay further interest rate increases as Americans tighten their belts.
Those competing forces left the markets at sea, in search of clear direction.
Closer to home, attention will turn to Australia's employment figures, which the government is due to hand down. The jobs market has remained remarkably resilient despite higher interest rates, but economists will be watching closely for signs that tighter monetary policy is finally beginning to slow the roll on hiring.
Those job numbers could help us better set expectations for future Reserve Bank decisions and provide another important clue about the outlook for inflation, interest rates, and the broader economy.
That’s this week’s On the Money wrap. Prefer to listen? The On the Money podcast breaks down the latest every weekday. You can tune in here or wherever you get your podcasts.
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