ASX recovers, Reserve Bank flags US tech concentration risk

ABC NEWS (Australia)

The Australian share market has posted its best trading day in almost two months as the price of gold surged to new records. Meanwhile, global investors remained unfazed by the US government shutdown, but there are concerns that America's AI boom is starting to resemble a bubble.

Transcript

00:00Well, the share market is getting close to a record high again, after bouncing back by

00:05a solid 1.1% today. Yet corporate earnings have been going down for years, so arguably

00:11it's getting harder to justify the expensive prices that people have been willing to pay

00:15for Australian shares. A similar trend is happening in the UK and Europe, while profits

00:21in the US are going gangbusters, though that's mainly being driven by America's tech giants

00:25like Nvidia, Microsoft, Apple, Google and a few others that have seen their share price

00:30surge as a result of the AI boom, which some say is starting to resemble a bubble. In fact,

00:37these trillion dollar companies have gotten so big, they now make up 40% of the value of

00:41Wall Street's S&P 500. Now that's something the Reserve Bank says it's a little bit worried

00:45about in its latest financial stability review. Because if these companies eventually have

00:50bad days and they go on for quite a while, they'll have a huge impact on investor confidence

00:55which could flow through locally. But none of that got people worried at all today,

00:59with banks, miners and healthcare stocks driving the ASX higher. Meanwhile, the gold price also

01:05hit a new record, again, at almost US$3,900 an ounce, while the Aussie dollar is trading at 66.2 US cents.

01:14And finally, markets in the US, Europe and Asia also went up, as they weren't bothered at all

01:18by the US government shutdown, as they're getting used to US politics being dysfunctional.

01:23In fact, these markets are at or near record highs, but the equity risk premium has fallen

01:29off a cliff. So basically it means outside of Australia, a lot of people worldwide are also

01:34probably paying too much for shares, which could get a bit messy if company earnings don't improve

01:39significantly. And that's finance.

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