Latest / ausbiz a.m / 23.10.26 Mark Gardner, MPC Markets
Transcript
- nadine: Good morning to you. It is the 23rd of October. I'm Nadine Blaney. It's a pleasure to be here with you on this Friday morning. So Wall Street finished in the red overnight. Tech took the heaviest hit. The SP 500 was down around about a half one and a half percent, but the Nasdaq at one point was down close to 3%. I think it settled down by 2.6%. The AI trade is Well, cracks in confidence there. Semiconductor stocks reversed the gains of the previous session. So really defensive. We had investors moving into bonds, yields fell, oil hit a five-month high. So lots going on there. We had again tech results. So this is one to really talk about in just a moment with my guest, meta. Was the story. despite beating on revenue, so sixty-four and a half billion dollars up twenty-six percent on a year, the market sold off. Of course, you know this. Operating profit dropped sharply, but it was the CapEx. So guidance lifted to between 135 and 145 billion dollars. Jobless claims, they came in at close to 200,000, actually the lowest in three months. Whale below the consensus for 200,000. So the labor market in the States is still looking good. All of this follows a session yesterday. We saw the SP or ASX 200 losing 0.4% energy materials doing the damage. West Farmers was also down nearly 3%. So lots of consternation here about interest rates this week after the deputy governor of the Reserve Bank, Hauser did sound very hawkish when he spoke on Wednesday. look, next DC was the story of the week. Let's get some perspective now with Mark Gardner, who's joining us from MPC Markets. Mark, good morning to you. Mark: Good morning Nadine, how are you going? nadine: Yeah, wow. But lots going on. So talk to us about the session overnight, please. Mark: The session overnight, well, I mean, on the surface, obviously the the concentration risk of having you know, those chip stocks and those major AI players being such a such a huge part of all of the indexes really, or excluding the Dow, is that whilst it's helped the US market stay or levitate almost against what what's been brought a weakness globally under the surface. that has a that has a flip side as well. So when they you know the stocks was down seven percent last night, that's its worst day for quite some time. and then we had the NASDAQ one hundred down just on three or around about three percent. But half the stocks were actually up in that. So that that was its worst day since June. And and bond yields have actually fallen away, fallen away a little bit overnight, which really does send a bit of a confusing message to investors because you know, normally you would you would you would see a rally when with bond yields coming down. But I think it's just a bit of an unwind of this trade. the the NIMBYism or the not in my backyard sort of thing you know has spread overall. I mean we saw next DC this week had you know had that dramatic fall because of foot scray, fresh off the back of that knockback in Lane Cove. But I think as Trump's hopping around and doing the the campaign trial for the midterm elections, the pushback against data centres is is very, very real. And, you know, you saw him yesterday announcing that they sh you know, data centers should be paying dividends to, you know, to to citizens, et cetera, which looked very unrealistic to me and and but you know, it the amount of money he was offering it was five to ten thousand dollars per citizen or something. per is is just a reflection of how much people don't want them in their backyards. So that chip sector, people are starting to cool on what future demand is gonna look like because there's gonna be similar to next D C and and the likes, there's gonna be delays to getting data centers approved and pushed through. nadine: It's amazing that this wasn't really considered a big problem just a very short time ago. You know, you would think that in the risk reward scenarios that were painted by some of these big companies, they might have seen this perhaps as a bigger issue than it appears as as if they, you know, than they did. Mark: Well, I think it's more so the investors. I mean, I I I think there's been a couple of them, including Jensen, that have been on the record for for a couple of years now, that power was gonna be the constraint. And that's where all of this all of the NIMBYSMs really started, is that, you know, some of those constituencies that, particularly in the US that put up their hand, or some of the states that put up their hand to have those data centers early, particularly like Texas, which had a huge excess of energy in form of natural gas. Their power bills have gone through the roof and the k and you know, their constituents are turning around going, well, yes, it's creating jobs, et cetera, but it's giving with one hand and taking with the other. And I believe Texas has basically put a stop on any new future data centers at the moment and the approval process is is quite, you know, is quite a lot more stringent than what it was. But those same constituents were, you know, gleefully putting up their hands two or three years ago, not I guess knowing the consequences to what their power bill would be. and then you add to that the fact that oil reached a five month high overnight. you it it doesn't help that they're getting, you know, people are getting hit at the pump and then they're also getting hit on their energy bill, etc. And then it's very easy to slip down that rabbit hole of, is that you know, AI's could cost me my job as well. So it it becomes a pretty easy story if you if you go down the rabbit hole online. to you know to start pushing back on these on these massive construction projects. So yeah, we saw it's it's nadine: Yeah. I I find it fascinating and nobody knows where it will end. Mark: it's a yeah it I mean there was always going to be some pushback at some stage because these sorts of these sorts of projects are enormous. But we had you know someone from the from the US government this week saying as well that he in regards to the US economy that they'll They would be in recession if this data center build out wasn't going on. So I think that's where, you know, and it's a bit of a long border bow to draw, but the the fall in bond yields overnight and then the fall in that chip stock is, you know, is the market saying, Well, if these data centers do get pushback, the economy's gonna suffer. nadine: Yeah. Mark: and you know, then these chip stocks are gonna suffer. nadine: yeah, I mean that CapEx build is what is fueling you know the growth in the US. so Mark, bringing it here, is next DC a buy considering how far it's fallen? Mark: look, on the surface it probably looks that way. One of the interesting things I found about that is that they were getting finance on the basis of being able to deliver these future gigawatts. So from my perspective, I would probably wait and see for now just in case that that does affect their financing agreements, because the cost of funding obviously is a big deal. And because these these guys don't operate on massive margins, and if if it does end up affecting their ability to you know to borrow money because those gigawatts are be are being pushed back and and that was I I guess in effect the security that they were pushing that they were putting up to get the rates they got then you know I would be a little bit concerned. But the yeah I'm I'm a little bit on the sidelines, a little bit wait and see for the moment because I I think that you know this sentiment is We haven't had a a a run of poor sentiment for a very long time, particularly in this sector. It'd be interesting to see how much sort of leverage money and and and how much investors sort of turn on the on the theme. So yeah, the consumer d the consumer staples in the US is f and transport are are the best performing sectors for the month so far in the US. that's a real reflection and I think healthcare is up there as well. It's a reflection of a very risk off rotation for for major funds. nadine: Mm-hmm. Okay, so what happens here today, do you think, Mark? Mark: I look I I would say we probably perform a little bit better than the US, obviously, because we don't have that exposure necessarily to the chips like the US and and as I said, the the equal weight S P was actually up about point eight of a percent overnight. So it really was just focused on those chip sector names. the spy's only down around about fourteen odd points. I think what I think we'll we will probably still end up down, but I think that's more concerns leading into the weekend over the Middle East. I think we're back onto that. Probably don't want to have a risk on position over the over the weekend because the US has ordered you know, many of their embassy and and government staff out of all the countries surrounding surround you know, in the Middle East so and then surrounding Humuz and and across some Iran, et cetera. which is a which is a pretty distinct escalation. And so I think there are genuine concerns that something may happen over this weekend in in the Middle East. because those evacuations are they're they're a very telltale you know sign that you know there there are attacks planned because obviously you you can't leave your own citizens just out, you know, flapping in the wind when you're about to have a major military attack. So I I do think You know, we won't be down as anywhere near what the S and P and the Nasdaq were. however, you know, I d I can't see any I can't see a big risk appetite flooding into the market until probably next week, once we see what happens over the weekend. nadine: Well, Mark, you nailed it. You've given us everything we need to know to start this session here locally. So today we get the S P preliminary October PMIs. we get September retail sales in the UK, and we get the University of Michigan final October sentiment read of consumers in the US. Otherwise, we'll have to see what this day brings us on this Friday, the twenty-third of October. Mark Gardner MPC Markets. Thank you so much. Mark: Thank you. Have a great day. nadine: Me too. And thank you for listening. We'll catch up with you on Monday or on osbiz.com dot AU.