Market Update: ASX Set for a Decline Amid Wall Street Slide and Oil Price Plunge

The Australian stock market is expected to open lower, reflecting significant sell-offs on Wall Street. Notably, Nvidia Corporation (NASDAQ:NVDA) experienced a substantial drop of 9.5% in New York trading, which contributed to a broader market downturn. This decline was driven by investor concerns over weak manufacturing data from both the United States and China. The combination of these economic indicators is seen as a catalyst for market volatility. 

Nvidia's sharp decline resulted in the loss of $US278.9 billion in market value, marking the largest single-day loss in US stock market history. Further pressure on the company emerged after reports that the US Justice Department issued subpoenas to Nvidia and other companies as part of an ongoing investigation into potential antitrust violations in the AI computing sector. 

Global Economic Factors at Play 

Investor sentiment is increasingly cautious ahead of the US jobs report scheduled for release at 10.30pm AEST on Friday. This report is critical as it may influence the Federal Reserve's decision on interest rates during its September 17-18 policy meeting. The potential for a rate cut, depending on the strength of the jobs data, is a key factor in market forecasts. 

Additionally, economic activity in the US manufacturing sector contracted for the fifth consecutive month in August. Although the index rose slightly to 47.2% from July’s 46.8%, it remains in contraction territory, according to the Institute for Supply Management (ISM). Key indicators, such as new orders and production, continue to show weakness, with new orders reaching their lowest level since May 2023. 

Impact on Commodities and Global Markets 

In commodity markets, Brent crude oil experienced a significant drop of nearly 5%, falling below $US74 per barrel. Iron ore prices also continued their decline, losing 3.5% to settle at $US93.45 per tonne in Singapore trading. The Australian dollar weakened by more than 1%, adding further pressure on the domestic market. 

ASX futures were down 91 points or 1.1% near 7am AEST, indicating a challenging opening for Australian shares. In New York, the US-listed shares of BHP Group Limited (ASX:BHP) fell by 5.1%, while Rio Tinto Limited (ASX:RIO) dropped 4.6%. This is reflective of the broader sell-off in global markets. 

Volatility surged as markets reacted to these developments, with the VIX Index, a measure of market risk, increasing by 33% to 20.72 in Chicago trading. The NYSE Fang+ Index, which tracks major tech companies, declined by 3.5%, with all seven of the leading tech stocks recording losses. 

Sector-Specific Insights 

The technology sector faced significant headwinds, with stocks like Tesla Inc. (NASDAQ:TSLA) down 1.6%, Microsoft Corporation (NASDAQ:MSFT) falling 1.9%, and Apple Inc. (NASDAQ:AAPL) decreasing by 2.7%. Alphabet Inc. (NASDAQ:GOOGL) and Amazon.com Inc. (NASDAQ:AMZN) also posted declines of 3.9% and 1.3%, respectively. 

Boeing Co. (NYSE:BA) was another notable loser, with its shares dropping 7.3% following a downgrade by Wells Fargo. The firm cited limited upside potential for the aircraft manufacturer, contributing to the broader negative sentiment in the industrial sector. 

Focus on Corporate Developments 

In corporate news, Blackstone Group Inc. (NYSE:BX) emerged as the winning bidder in a $23.5 billion acquisition of AirTrunk, securing a significant deal in the AI and data center space. This acquisition underscores the ongoing consolidation in the technology infrastructure sector, driven by the growing demand for AI capabilities. 

Coles Group Limited (ASX:COL) announced a rebranding strategy for its Vintage Cellars stores, transitioning to an expanded Liquorland format as it seeks to enhance its competitive position in the retail liquor market. 

Looking Ahead 

Investors will closely monitor the release of the US jobs report and other key economic data, including factory orders and durable goods, which are expected to provide further insights into the health of the US economy. The upcoming Bank of Canada rate decision will also be of interest as central banks globally navigate a complex economic environment. 

The ASX is set for a volatile session as it reacts to global market movements, with particular attention on the performance of major miners and technology stocks. The broader economic outlook remains uncertain, with market participants preparing for potential shifts in monetary policy and economic conditions in the coming weeks.