Why are ASX 200 tech shares taking a beating today?

Leading ASX 200 tech stocks are well into the red on Wednesday.

Bernd Struben

Author bio Bernd Struben earned his BA in economics from the University of Michigan in 1991, with post-graduate studies in environmental economics at the University of Connecticut. Over the years he’s written about and analysed the tourism industry in the Caribbean; Europe’s commercial real estate markets; and, since moving to Australia in 2010, global and Aussie share markets. Bernd studies geopolitical and macroeconomic trends, alongside sector and company specific data, to gauge what he believes could be tomorrow's best investments. In his free time, you might find Bernd at the beach with his family or working on his next science fiction novel. Areas of expertise Australian and global share markets Macroeconomic and geopolitical trends Real estate Education Economics, University of Michigan Favorite investment quote "The four most dangerous words in investing are: 'This time it's different." — Sir John Templeton

Published February 14, 2024 2:07 pm AEDT

S&P/ASX 200 Index (ASX: XJO) tech shares are having a tough time of it today.

Though they're not alone.

In early afternoon trade the ASX 200 is down 1.0%.

As for the big tech stocks:

Cloud-based software solutions provider WiseTech Global Ltd (ASX: WTC) shares are down 1.4%
Accounting software provider Xero Ltd (ASX: XRO) shares are down 1.3%
Data centre operator NextDc Ltd (ASX: NXT) shares are down 1.5%

So, why are investors pressuring these ASX 200 tech shares on Wednesday?

Man on a laptop thinking. — Image source: Getty Images

ASX 200 tech shares eyeing sticky global inflation

The good news is that none of these companies have reported anything that might cause concern with their specific business models.

The bad news is that ASX 200 tech shares tend to be relatively sensitive to interest rates. And they look to be succumbing to headwinds blowing out of the United States.

With the latest inflation data from the world's biggest economy coming in higher than expected, the tech-heavy Nasdaq Composite Index (INDEXSP: .INX) closed down 1.8% yesterday (overnight Aussie time).

And ASX 200 tech shares are following the US market's lead lower.

Consensus estimates had pencilled in a 0.2% month on month increase in the US consumer price index (CPI) and a 2.9% year on year increase. That proved optimistic, with CPI increasing 0.3% in January and 3.1% over the past 12 months.

The data all but negated the chance of an interest rate cut from the US Fed in March, as some investors had still been hoping.

Commenting on investors' reactions to the US inflation print, Chris Zaccarelli, chief investment officer at Independent Advisor Alliance, said (quoted by Bloomberg):

Today's CPI report caught a lot of people off guard. Many investors were expecting the Fed to begin cutting rates and were spending a lot of time arguing that the Fed was taking too long to get started – not appreciating that inflation could be sticky and not continue down in a straight line.

But that doesn't mean investors should rush to hit the sell button on their ASX 200 tech shareholdings.

While the world's most watched central bank may hold rates steady in March, most analysts still expect the Fed to start easing in 2024, possibly in the second quarter.

Brian Rose, head of asset allocation at UBS Global Wealth Management, said the latest US inflation print "doesn't change our positive fundamental outlook for 2024 of solid growth, further disinflation, and the start of Fed rate cuts in Q2 that is supportive of risk assets".

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