Banks steady Australian shares as AI rally doubts weigh on miners, tech

By Reuters News

By Nichiket Sunil and Shravya Marakini

Oct 13 (Reuters) - Australian shares recouped early losses on Tuesday, with gains in heavyweight banks countering declines in mining and tech stocks as doubts grew about the sustainability of the global AI rally.

The S&P/ASX 200 index .AXJO closed flat at 8,783.90 points after trading lower for much of the session. The benchmark rose 0.8% on Monday.

The country's top four lenders rose between 1.3% and 2.3% after recent declines, helping the financials sub-index .AXFJ climb 1.4% to its highest close since September 7.

The lenders are due to report earnings later this month, with investors closely watching how elevated borrowing costs, a mortgage slowdown and pressure on household finances affect margins and profitability.

Minutes of the Reserve Bank of Australia's September meeting showed the board unanimously backed an interest rate hike to a 15-year high, while expressing concern that inflation could remain elevated for longer than expected.

In Asia, technology stocks tumbled as investors questioned the sustainability of the global AI rally amid rising competition, mounting debt burdens and tensions in the Middle East.

The weakness spilled over to the Australian market, with globally exposed stocks bearing the brunt of the selloff.

Miners .AXMM slid 2.2%, with BHP BHP.AX and Rio Tinto RIO.AX down 1.8% and 2.4%, respectively.

Both BHP and Rio have increased their exposure to copper, a key metal for data-centre expansion and electrification, strengthening their links to the AI investment theme.

"Copper has been a major beneficiary of the AI and data centre investment boom this year, and with BHP and Rio Tinto increasingly exposed to the metal, weakness in Asian technology stocks can certainly spill over into the resources sector," said Greg Smith, investment specialist at Generate Investment Management.

Technology stocks .AXIJ slid 4.4%, with all constituents in negative territory. Defence tech provider Elsight ELS.AX dropped 11.8%.

New Zealand's benchmark S&P/NZX 50 index .NZ50 closed down 0.6% at 13,749.60.

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