Tech sector plunges; traders lift bets on interest rate increase

Australia’s technology stocks plunged 3.4 per cent on Thursday, tracking a global sell-off in businesses linked to the rise of artificial intelligence and partially reversing an 18-month rally for the sector.

The heavy selling across the Asia Pacific follows a report that the Biden administration was weighing tough trade restrictions if companies such as Tokyo Electron and ASML keep giving China access to advanced semiconductor technology.

Former president Donald Trump has also suggested that the US should seek to rely less on Taiwanese computer chip manufacturer TSMC.

Rate hike bets

On Wall Street, the tech-heavy Nasdaq index lost 2.8 per cent to record its worst day since 2022, while Japan’s Nikkei 225 Index tumbled 2.3 per cent on Thursday.

Australia’s benchmark S&P/ASX 200 fell from a record high to finish down 21.4 points, or 0.3 per cent, to 8036.5 points at the close, as tech’s heavy losses were offset by gains among healthcare, retail and utilities businesses.

During the trading day, data showed the Australian economy added 50,200 jobs in June, more than double consensus as the jobless rate ticked up to 4.1 per cent. That prompted bond traders to dial up the chance of an August interest rate increase from the Reserve Bank from 14 per cent to 20 per cent.

“The jobs data nudges us further in the direction of a rate hike from the RBA,” said Damien Boey, the head of global macro strategy at Barrenjoey. “If we get a hike, it’s negative for banks and consumer discretionary, as it takes some of the shine off tax cuts, and doesn’t fix the depletion of excess savings among households.”

The Australian dollar traded flat on the data to buy $US67.3¢ at the closing bell. The yield on Australian one-year government bonds rose 4 basis points to 4.39 per cent.

Stocks in focus

Shares in Domino’s Pizza fell 8.2 per cent to $33.12 after it warned it would close stores in France and Japan and downgraded guidance for store growth in the years ahead.

Investors in Domino’s fast-food rival Guzman y Gomez shrugged off the news to push shares in the burrito merchant up 1.1 per cent to $26.80.

Elsewhere, footwear and fast fashion retailer Accent Group said it would close 18 Glue stores due to weak performance from the youth fashion brand.

It said that across other brands, including Hype DC, Nude Lucy, Stylerunner and The Athlete’s Foot, same-store sales climbed 4.1 per cent over the second half of financial 2024. The stock jumped 10.2 per cent to $2.16 on the news.

Biotech Telix Pharmaceuticals lifted its sales guidance for financial 2024 to be between $745 million and $776 million as a result of strong sales for its prostate cancer imaging product Illuccix. Shares dropped 2.6 per cent to $19.47, but have still rocketed more than 1000 per cent in five years.

And in the gold space Evolution jumped 2.8 per cent to $4.09 as it revealed quarterly profits and prices for the precious metal shadowed record highs.