Australia’s index of the top 200 shares has bounced after suffering a sharp bout of selling in October and November.
AUS200 – Daily Chart
The AUS200 index has reached resistance at 8721 and has retreated. The key question now is whether the price can return above that level or continue to decline.
Copper prices had been driving the price of Aussie shares higher, but pulled back from record highs. Copper prices fell as fears of a tech bubble resurfaced, while iron ore futures ended the week lower, weighed down by slower demand in the top consumer, China.
Banking shares have also fallen after the central bank talked of further rate increases. The RBA warned that borrowing costs could rise if inflation pressures continued.
Australia’s economy has experienced a rise in data centre activity, driven by rapid cloud adoption, growth in artificial intelligence (AI), and increasing digital sovereignty needs. The country has strong subsea cable links to both Asia and the United States, which has made it critical as a connectivity hub for the broader Asia-Pacific region.
NextDC is building a $7 billion, 650 megawatt data centre in Sydney, securing ChatGPT owner OpenAI as its key customer. Aussie Treasurer Jim Chalmers hailed the deal as significant for Australia, saying it will provide thousands of direct and indirect jobs.
The economy has been another headwind, with stable but not impressive growth data in recent months. The Australian economy also unexpectedly shed jobs and fewer people were looking for work, suggesting a gradual loosening in the labour market that may allow the Reserve Bank to extend a recent interest-rate pause.
The Australian share index will likely remain volatile as commodities continue to show some correction. The recent bounce needs to get back above the 8,721 level to have any hope of a return to a bullish posture.
