ASX 200 Slips as Miners Slide and Zip Crashes on Fraud Hit, While Banks Rally After Wall Street Tech Rout

Australian shares closed slightly lower on Friday, as heavy losses in mining and energy stocks and a dramatic plunge in buy now, pay later company Zip outweighed gains in banks and consumer stocks after a sharp technology sell-off on Wall Street.

The S&P/ASX 200 index fell 13.1 points, or 0.15%, to close at 8,780.1. The benchmark had been down as much as 0.4% around midday before recovering some ground in afternoon trading.

A split market

The session was marked by a sharp divide between sectors.

Materials stocks were the biggest drag, falling more than 3% at one point, as iron ore and gold prices weakened. Energy stocks dropped about 2%, while information technology shares also fell about 2%, tracking losses among technology companies in the United States.

On the other side, defensive and domestic sectors attracted buyers. Financials rose about 1%, consumer discretionary stocks gained more than 1% and telecommunications shares also advanced.

"Money is shifting into safer sectors, such as health care, insurers and consumer staples," said Tapas Strickland of Moomoo Australia and New Zealand, describing the broader trend in global markets.

Zip plunges

Zip Co. was the standout loser, with shares falling as much as 50.5% to A$1.025, a two-and-a-half-year low and the biggest intraday drop in the company's history. The stock recovered some of those losses later in the day but still traded down about 27% to 30% in the afternoon.

The sell-off followed the company's first-quarter update, in which it disclosed what it called an "external fraud event" in the United States. Zip said the incident involved the coordinated creation of new accounts to carry out unpaid transactions, which temporarily reduced transaction volumes in July and August and added to its operating costs.

The company said it had notified authorities and lodged an insurance claim.

Despite the incident, Zip's underlying business continued to grow. Total transaction volume rose 18% from a year earlier to A$4.6 billion, total income increased 17% to A$376.1 million and adjusted earnings rose nearly 20% to A$75.1 million.

However, bad debts rose. Net bad debts written off climbed to A$49.5 million from A$39.3 million in the previous quarter. Zip said it expects bad debts to decline in the second quarter but remain in the upper half of its target range.

Zip shares are now down nearly 57% this year.

Miners under pressure

Mining stocks fell as commodity prices weakened. Iron ore slipped 0.7% to about US$90.73 a tonne, weighing on the major iron ore producers.

Rio Tinto shares fell 2.2% to A$147.05 after the company announced plans to invest US$1.9 billion (A$2.7 billion) in the Kangwinan bauxite project in Queensland, with first production targeted for 2029.

Gold miners were also hit hard after the price of gold fell to a two-month low earlier in the session. Spot gold traded at about US$4,015 an ounce in the afternoon. Ora Banda Mining fell more than 15%.

Lithium and other battery metals stocks were among the worst performers, with Sunrise Energy Metals falling more than 16% and Elevra Lithium dropping about 10%.

Energy stocks fall despite oil gains

Energy stocks declined even as oil prices remained elevated. Brent crude rose 0.5% to about US$113.70 a barrel in the afternoon, after earlier hitting a five-month high amid ongoing tensions in the Middle East.

Investors also weighed news that satellites had detected large methane plumes over Chevron's Gorgon liquefied natural gas project in Western Australia, prompting a warning from the United Nations.

Banks and retailers rise

Banks helped limit the market's losses. Commonwealth Bank of Australia, the country's largest lender, rose almost 3%.

Furniture retailer Nick Scali gained about 4.5%, recovering some of the ground it lost earlier in the week after a profit warning. Premier Investments rose 4%, property group Charter Hall gained more than 3% and packaging company Amcor rose 3%.

Wall Street tech rout

The cautious mood followed a sharp sell-off in U.S. technology stocks overnight. The Nasdaq Composite fell 2.9% and the S&P 500 dropped 1.2%, while the Dow Jones Industrial Average was little changed.

Meta Platforms fell about 7% after raising its spending plans for artificial intelligence, even though its earnings beat expectations. Chipmakers and other AI-related stocks also declined as investors questioned the rising cost of AI investment.

The sell-off pushed investors into safer assets, sending the yield on the 10-year U.S. Treasury below 5% for the first time in nearly a month.

Economist Mohamed El-Erian said the tech sell-off was "driving a flight to quality, sending yields tumbling."

Weakness in China also weighed on sentiment. China's CSI 300 index has entered a bear market, down 20% from its June peak, amid fading hopes for major economic stimulus.

Australian dollar

The Australian dollar slipped 0.1% to 70.15 U.S. cents, but was on track for a gain of about 1% for the week.

Domestic news

In local economic news, Treasurer Jim Chalmers said the government's upcoming mid-year budget update could show business investment more than doubling from the May budget forecast, adding more than A$50 billion over three years.

A review of the Snowy 2.0 hydroelectric project found it could cost up to A$25 billion, roughly 12 times its original budget of A$2 billion.

What's next

Investors will turn their attention to more U.S. earnings from major technology companies next week, along with economic data that could shape expectations for interest rates.

David Bassanese of Betashares said of the prospect of U.S. rate increases: "The case to raise rates is already in place."

Locally, investors will watch for the latest Australian inflation figures and further quarterly updates from mining companies.