The Australian stock market slightly declined in an uneventful session on the close of trading on Wednesday, with traders largely overlooking a 5.2 per cent monthly inflation surge that met economists’ predictions.

The primary S&P/ASX 200 Index dipped by a mere 7.9 points, or 0.1 per cent, ending at 7030.3. Out of its 11 industry sectors, nine closed with losses. Facing the possibility of a prolonged elevated cash rate in Australia, the tech sector, which is sensitive to interest rate changes, experienced the most significant downturn, continuing its drop from the previous day and finishing down 0.96 per cent.

U.S. stocks showed varied results at the close of Wednesday’s trading session. The S&P 500 edged up 0.02 per cent to close at 4,274.51, while the Nasdaq Composite added 0.22 per cent to end the session at 13,092.85. The yield curve of U.S. treasuries notably steepened, the standard 10-year Treasury yield climbed, hitting its peak in over 15 years, as traders balanced concerns about sustained inflation and an extended period of stringent monetary policy than previously anticipated. Meanwhile, crude oil recorded its most substantial daily increase (3.6 per cent) since May. Economic indicators were promising; both the U.S. headline durable goods orders for August and core capital goods orders exceeded forecasts, indicating a robust economy.

Tech giants, namely Apple Inc., Microsoft Corp., Amazon.com Inc., and Google-parent Alphabet Inc. have dragged the tech sector down more than 10 per cent from a July peak. The threat of tight policy is undoing some of the market’s biggest gains this year in the high-flying tech stocks.

The Australian market looks to start off on a weaker note today, with the SPI200 dropping by 13 points or 0.18 per cent, settling at 7055.

Trending Now

Another week and another legal battle for technology companies. Amazon faced a lawsuit from the Federal Trade Commission, which claimed that the core practices of the company’s online retail operations were unlawful. However, the market’s reaction was muted.

So, why the lacklustre market response? For one, the impending FTC lawsuit was already anticipated. Additionally, the FTC’s track record of unsuccessful lawsuits in recent times might have played a role. Arun Sundaram from CFRA Research summarised the market’s tepid reaction in a client note:

“The FTC, under the leadership of Lina Khan, has not shied away from undertaking challenging cases, even when the odds of success are low . . . it will be a lengthy and uphill battle for the FTC . . . the FTC could have a tough time defending its stance that Amazon’s current business practices are harmful to consumers. Overall, we see low risk of major structural changes at Amazon. We keep a Buy opinion.”

Meta has introduced new AI technologies and celebrity-backed virtual assistants, aiming to accelerate the development of the metaverse as the US tech giant seeks to drive engagement on its platforms. On Wednesday, CEO Mark Zuckerberg unveiled the AI solutions alongside the company’s latest Quest 3 virtual reality headset and the most recent edition of the Ray-Ban smart glasses. The new AI features are driven by the company’s Emu computer vision model.

Peloton and Lululemon announced a five-year strategic partnership. On Wednesday, the two companies unveiled a five-year collaboration that will integrate Peloton’s content into Lululemon’s fitness app. Conversely, Lululemon will be recognised as Peloton’s main sportswear partner, and a select group of Peloton’s trainers will represent the clothing brand as ambassadors. Following the announcement, Peloton’s shares surged over 15 per cent in post-market trading. In contrast, Lululemon’s shares remained unchanged after regular trading hours, even though it boasts a market capitalisation of approximately $48 billion compared to Peloton’s $1.7 billion.

Expert Views

The Australian Financial Review’s Smart Investor asked seven of Australia’s best stock-pickers for their views on what companies might be good to own for the next 10 years. Two stocks from the published weekly portfolio were nominated, REA Group & Xero.

REA Group

Ben Clark, a portfolio manager at TMS Capital, believes the real estate website REA Group can deliver for shareholders. “If you’re talking 10 years, you’ve got to be genuinely confident a business isn’t at risk of disruption and 99.9 per cent confident it’ll still be leading its market and driving ahead,” Clark says.

“To me, REA fits the bill. It’s an oligopoly, it’s unlikely there will ever be a third player, and every single result we look at, it’s pulling away from Domain. Finally, in the next decade the government wants to build 1 million homes for millions more immigrants, so we like the outlook.”

Xero

Chris Tynan, DNR Capital’s tech analyst, says the online accounting platform Xero fits the outperforming fund manager’s profile for a long-term winner.

“Xero’s dominant accounting product essentially became the plumbing of small enterprises, producing high barriers to entry, sticky switching costs and strong pricing power,” Tynan says.

“Xero’s ability to continuously reinvest cash flows into high returning opportunities in large and growing global markets is uniquely attractive on the ASX. Despite this strategy resulting in a high headline multiple [of profits], the simple formula of user and pricing growth combined with targeted investment will compound shareholder value for years to come.”

Final Thoughts

Indonesia plans to prohibit purchases on social media platforms and intends to implement stricter e-commerce regulations. As a result, TikTok’s e-commerce aspirations suffered a setback as Indonesia, one of its most significant and potential-rich markets. Indonesia’s trade minister, Zulkifli Hasan, announced on Wednesday that the new rules, applicable to all social networking sites, aim to promote “equitable and fair” competition, safeguard user data, and protect offline small to medium enterprises in the region’s largest economy. While TikTok’s application remains accessible, the prohibition on sales through social media means the platform can no longer support transactions. Notably, Indonesia was the initial and biggest market for TikTok Shop, the e-commerce platform introduced in 2021.

CNBC reports Costco is selling 1 ounce gold PAMP Suisse Lady Fortuna Veriscan bars and they are selling out in a few hours. Costco Chief Financial Officer Richard Galanti said the bars are in hot demand and don’t last long when in stock. Gold has risen more than 15 per cent over the past year and more than 55 per cent over the past five years.

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