In a promising turn for investors, the Australian share market is set to open higher today, buoyed by a significant rebound in technology stocks on Wall Street. This comes as the Commonwealth Bank of Australia (CBA) reports a $2.6 billion quarterly profit, reflecting a slight increase from the previous year.
The tech-led rally on Wall Street was driven by impressive gains in major AI-related companies such as Nvidia and Palantir. This surge follows progress in Washington towards ending the longest government shutdown in US history, which had cast a shadow over economic prospects.
Commonwealth Bank’s Steady Performance Amid Rising Costs
On the financial front, the Commonwealth Bank of Australia announced a marginal rise in its first-quarter profit, attributed to robust lending and credit volumes. The unaudited cash net profit after tax reached $2.6 billion for the quarter ending September 30, slightly up from $2.5 billion in the same period last year.
Operating income saw a 3% increase, driven by growth in lending and deposit volumes, alongside higher non-interest income. Notably, home loans grew by $9.3 billion, surpassing the system average, while household deposits expanded by $17.8 billion.
Home loan arrears decreased over the quarter to 0.66% (-4bpts).
Despite these positive figures, CBA noted a reduction in the headline net interest margin due to strong growth in lower-yielding liquid assets. Operating expenses, excluding restructuring and notable items, rose by 4%, largely due to wage and IT vendor inflation.
Wall Street’s Tech Rally: A Rebound in AI Stocks
Wall Street’s rally was spearheaded by significant gains in heavyweight tech stocks. Nvidia, the world’s most valuable company, saw its stock rise by nearly 5%, while AI data analytics firm Palantir jumped 9%, and Tesla added 4.1% to its value.
According to Ross Mayfield, investment strategy analyst at Baird in Louisville, Kentucky, “This is a rebound after being slightly oversold last week. It’s another example of the ‘buy the dip’ mantra really acting quickly in the tech and AI space.”
“There is nothing structural hitting the AI theme. In fact, a lot of earnings reports have been really strong in that sector,” Mayfield added.
The optimism surrounding artificial intelligence has been a driving force behind a bull run in US stocks this year. However, recent concerns about monetization and circular spending in the sector had triggered a wave of selling, marking the Nasdaq’s worst performance in over seven months last week.
Implications for the Australian Market
The rebound in US tech stocks sets a positive tone for the Australian market. ASX futures were up 47 points, or 0.5%, to 8,894 at 7:00 am AEDT, indicating a strong start for the local market.
Meanwhile, the Australian dollar appreciated by 0.7% to 65.38 US cents, reflecting increased investor confidence. Commodity markets also showed positive momentum, with Brent crude oil up 0.8% at $US64.05 a barrel, spot gold jumping 2.7% to $US4107.47, and iron ore rising 0.9% to $US102.15 a tonne.
As the day unfolds, investors will be closely monitoring any further developments in the US government shutdown negotiations and their potential impact on global markets. The Australian market’s response to Wall Street’s tech rally will be a critical indicator of investor sentiment moving forward.
This development comes as global economic superpowers face their own challenges. At an investment conference in Sydney, US Federal Reserve chair contender Marc Sumerlin expressed concerns about a slowing economy and a debt bubble in the artificial intelligence sector. Meanwhile, veteran China observer Michael Pettis highlighted structural issues in China, including excessive investment.
As the global economic landscape continues to evolve, market participants will be keenly observing these dynamics and their potential implications for future growth and stability.
