Mining gains limit ASX slide despite tech sell-off flowing from Nasdaq to Australian market

By business reporter Michael Janda
US tech stocks have taken a big hit over recent weeks, with the Nasdaq edging towards a correction. (Reuters: Brendan McDermid)

The Australian share market has followed a negative lead from Wall Street, where a tech sell-off over recent weeks has dragged the Nasdaq closer to a "correction". 

A technical correction is where the value of an index falls 10 per cent or more. Since its most recent peak in mid-November, the Nasdaq has lost around 7 per cent of its value.

Most of that has come since the new year started, with Wall Street's tech-heavy index off 4.5 per cent so far this year.

That included a 1 per cent slide on Friday that capped off the Nasdaq's worst week in almost a year, with some big names such as Tesla included in the sell-off, with the electric car maker down 3.5 per cent that session.

"The absence of fundamental news for the tech space in this risk-off environment has catalysed a brutal surge of selling tech names to kick the year off in 2022 as valuation scrutiny remains front and centre for investors," noted Daniel Ives and John Katsingris from US-based Wedbush Securities.

"With nervousness building and a white-knuckle environment around tech stocks in this tightening Fed backdrop, we view this as the most important upcoming earnings season for tech stocks in many years to turn the tide and derail the negative sentiment."

Locally, the tech index mirrored Friday's 1 per cent Nasdaq fall.

Tech names such as Afterpay (-2.3pc), Wisetech Global (-2.7pc) and NextDC (-1.6pc) were being sold down, but many had narrowed their early losses by the afternoon.

For example, after initial heavy falls, buy now, pay later firm Zip was up 0.8 per cent at $3.85 by the close.

Battery company Novonix also bucked the tech sell-off, rising nearly 11 per cent on plans to dual-list on the Nasdaq.

The healthcare sector fell around 1 per cent.

Biotech giant CSL finished off 0.9 per cent at $280, while Clinuvel Pharmaceuticals and Pro Medicus had bigger 3.2 and 2.8 per cent falls respectively.

However, it was the consumer discretionary sector that had the biggest drop, losing 1.3 per cent amid fears about the effect of Omicron on summer retail sales.

JB Hi-Fi dropped 2.4 per cent and Harvey Norman 1.2 per cent.

However, after a shaky start, key travel stocks including Qantas (+1.6pc), Flight Centre (+2.4pc) and Webjet (+1pc) all gained ground.

That was despite private equity-owned Virgin Australia slashing flight capacity by around a quarter for the next two months in response to Omicron, with some routes likely to be suspended altogether until the middle of the year. 

While tech, health and consumer stocks were generally on the nose today, the dominant mining and energy sector helped keep the Australian share market from posting bigger falls.

BHP (+2.4pc), Rio Tinto (+2.3pc) and Fortescue (+1.3pc) were all strongly higher, as were many smaller miners such as South32 (+3.6pc).

Energy stocks were also seeing gains, with Woodside Petroleum (+2.3pc), Santos (+0.7pc) and Origin (+1.1pc) all gaining ground.

Energy generator and retailer AGL was one of the market's strongest performers, up 8.6 per cent to $6.82, in part on some positive analyst comments following previous price declines last year.

Overall, the benchmark ASX 200 index ended down just 0.1 per cent at 7,447 while the broader All Ordinaries was also off 0.1 per cent at 7,766 points, with both retracing much of this morning's lost ground.

Building approvals edge higher

In economic news, ABS data collected from local governments showed building approvals rebounded slightly in November following a steep slump in October.

Approvals for new homes rose 3.6 per cent in the second last month of 2021, having slumped 12.9 per cent in October to a 14-month low.

Approvals are now more than 30 per cent below a peak in April, as the effects of the federal government's HomeBuilder stimulus scheme wear off.

While a jump in apartment approvals led the national increase in new homes, apartment approvals in New South Wales plummeted nearly 50 per cent to their lowest levels since February 2012.

"The increased popularity of working from home may support approvals in the short term, as could higher savings rates if the Omicron variant continues to impact spending," wrote ANZ economist Adelaide Timbrell.

The data had little impact on the Australian dollar, which was trading at 71.92 US cents around 5:20pm.


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