ASX Weathers Wall Street's AI Rout, but Three Market Risks Are Becoming Harder to Ignore

Australian equities: what moved the ASX 200?

Australian shares finished lower on Friday, 6 November, as the technology-led sell-off on Wall Street spread across global markets. The ASX 200 closed at 9,020.8, down 44.3 points, or 0.49%, surrendering part of Thursday's 230.6-point rally. The broader All Ordinaries declined 0.66% to 9,144.7.

The market recovered from an early plunge of approximately 115 points, demonstrating some underlying resilience despite the deteriorating international backdrop. Seven of 11 sectors finished lower, with materials and technology under pressure, while consumer staples provided support.

BHP Group (ASX: BHP), Rio Tinto (ASX: RIO) and Fortescue (ASX: FMG) each lost around 2% as mining shares weakened. By contrast, Woolworths Group (ASX: WOW), Coles Group (ASX: COL) and Endeavour Group (ASX: EDV) outperformed.

Nine Entertainment (ASX: NEC) was a notable exception, gaining 9.2% after its annual general meeting update highlighted 3% revenue growth, 17% EBITDA growth for FY26 and further anticipated earnings growth in FY27. Expected annualised cost savings exceeding $180 million also provided encouragement.

Macquarie Group (ASX: MQG) faced a different challenge. Its half-year results showed home lending growth of 9% to $198.2 billion, but APRA imposed an additional $100 million capital overlay following a historical capital calculation and governance failure. Importantly, the regulator indicated that Macquarie Bank's financial stability had not been undermined.

The Australian dollar, bonds and the RBA

The Australian dollar weakened to approximately US68.97 cents during Friday's session, reflecting weaker global risk appetite. The decline followed an earlier retreat from US70 cents as markets reassessed the outlook for technology valuations and global growth.

Australian government bond yields remained elevated. The two-year yield was around 4.83%, while the 10-year yield approached 5.03%. These levels reinforce the pressure facing highly leveraged businesses, property-related companies and equities whose valuations depend heavily on future earnings.

The RBA's decision to increase the cash rate by 25 basis points to 4.85% remains an important domestic consideration. The six-to-three voting split revealed disagreement within the board, although the majority remained concerned about persistent inflation. Further tightening remains possible, but another increase is not guaranteed.

Global markets: China, Asia and Europe

Asian markets experienced substantial volatility on Friday following Wall Street's technology rout. Japan's Nikkei 225 and South Korea's KOSPI suffered particularly heavy losses, with the KOSPI triggering a temporary trading halt during its sharp intraday decline.

The pressure reflected the region's significant exposure to semiconductor manufacturing and artificial intelligence supply chains. China also experienced weakness, reversing some of Thursday's gains as the global technology sell-off spread.

Thursday's contrasting performance had seen the Shanghai Composite gain 0.1% to 3,689.91 and Hong Kong's Hang Seng rise 3.67% to 24,796.98. However, those gains offered little protection against Friday's deterioration in international sentiment.

Europe had also weakened on Thursday, with the STOXX 600 declining 0.38% to 654.87. Technology shares were particularly vulnerable, highlighting that concerns about AI valuations are no longer confined to the United States.

Wall Street: US stocks and the Federal Reserve

Thursday's American session was the week's defining market event. The S&P 500 plunged 4.36% to 7,353.73, the Dow Jones fell 3.44% to 51,523.06 and the Nasdaq Composite dropped 5.52% to 24,315. The Russell 2000 declined 4.45% to 2,729.75.

Technology stocks led the decline. NVIDIA fell 9.26%, Broadcom dropped 10.43%, Micron Technology lost 17.46% and Advanced Micro Devices plunged 17.26%.

The central concern is whether the enormous spending commitments supporting AI infrastructure can generate sufficient commercial returns. Political uncertainty surrounding potential restrictions on data-centre development has added another complication.

US 10-year Treasury yields declined to approximately 4.84%, reflecting demand for government bonds as equity markets weakened. The October US employment report is due later on Friday, meaning its findings were not yet available at our reporting cutoff.

Commodities: gold, oil and industrial metals

Brent crude approached US$100 a barrel as renewed concerns surrounding the Middle East and shipping security supported oil prices. This creates an uncomfortable combination for Australia: energy-related inflation risks remain elevated while global equity sentiment deteriorates.

Gold traded around US$4,070 an ounce in Friday's Asian trading, remaining sensitive to movements in the US dollar and expectations for interest rates. Copper faced pressure amid concerns about industrial demand, while iron ore remained around US$93 a tonne based on the latest available benchmark observation.

For Australian miners, the distinction between commodity prices and actual Chinese consumption will be particularly important over coming weeks.

What to watch next

The immediate focus is Friday's US employment report, followed by Wall Street's reaction when American markets reopen. Strong employment could reinforce expectations of restrictive monetary policy, while weaker figures could intensify concerns about economic growth.

We should also monitor semiconductor shares, Chinese industrial demand, AUD/USD and Australian government bond yields. These indicators will help determine whether the technology sell-off remains concentrated or spreads into the wider market.

Our assessment is that the market is entering a more demanding phase. The long-term potential of artificial intelligence remains significant, but the distinction between genuine earnings growth and excessive expectations is becoming increasingly important. Until that distinction becomes clearer, volatility and company-specific fundamentals are likely to matter more than broad market enthusiasm.