Shares in Harmoney Corp Ltd (ASX: HMY) are shooting up today following the release of a business update on the company’s robust performance for April.

The Harmoney share price is up 10.7% during afternoon trade, swapping hands for $1.75.

The consumer credit company provides online direct personal lending services in Australia and New Zealand. Let’s take a closer look.

What did Harmoney announce?

In its release, Harmoney reported total group originations for the month grew to NZ$37.8 million. This represents an 800% increase on the NZ$4.2 million achieved over the prior corresponding period.

The record results saw a surge in customer numbers after suffering a heavy impact from COVID-19 during 2020. In New Zealand particularly, loan originations stood at NZ$25.3 million, reflecting a 1,388% jump over the same time last year. Across the Tasman, Australia delivered NZ$11.5 million, a lift of 379% from the previous comparable period.

In addition, the company highlighted its Libra 1.7 technology in doubling the conversion of new customer loans in Australia. Cumulative origination volumes are forecasted to exceed $300 million by FY20, signalling a compound annual growth rate (CAGR) of 180%.

A new updated version, Libra 1.8, is slated for launch in New Zealand around early July this year. Harmoney is predicting that the newer technology will have a similar effect by boosting new lending in New Zealand.

Group receivables at the end of April came to NZ$490 million, slightly above the $485 million attained the month before. Harmoney stated that this metric is forecasted to grow considerably during the second half of 2021.

Lastly, the company also expanded its Australian bank warehouse facility to $177 million and extended it until January 2023. This brings undrawn warehouse capacity to more than $247 million.

Harmoney CEO, David Stevens commented:

Harmoney has accelerated its data-driven marketing program following our listing last November, significantly increasing new customer originations.

…The business is building strong momentum in Australia and has a clear and immediate plan in place for New Zealand originations growth.

About the Harmoney share price

Since listing in late November, Harmoney shares have failed to take off, down almost 50%. Year-to-date performance has fared no better, also sinking roughly 40% for investors.

Harmoney presides a market capitalisation of around $184 million, with approximately 100 million shares on issue.

More reading

• The Perenti (ASX:PRN) share price is collapsing 29%. Here’s why
• Is the NAB (ASX:NAB) share price a buy at $26?
• Why American Pacific Borates, NAB, Perenti, & Xero are tumbling lower
• Why AMP Capital’s chief economist is optimistic on the Federal Budget
• Top brokers name 3 ASX shares to sell today

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Why the Harmoney (ASX:HMY) share price is storming 10% higher today appeared first on The Motley Fool Australia.

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The S&P/ASX 200 Index (ASX: XJO) looks set to continue its poor run on Thursday. In afternoon trade, the benchmark index is down 0.6% to 7,000.8 points.

Four ASX shares that have fallen more than most today are listed below. Here’s why they are tumbling lower:

American Pacific Borates Ltd (ASX: ABR)

The American Pacific Borates share price has sunk 15% to $1.45. This mineral exploration company’s shares have come under significant pressure this week after announcing that it would defer its Phase 1A plans for the Fort Cady Borate Mine. Instead, the company intends to shift its focus to a larger borate operation and production of borate specialties combined with sales of boric acid.

National Australia Bank Ltd (ASX: NAB)

The NAB share price is down 2.5% to $25.90. Almost all of this decline is attributable to the banking giant’s shares going ex-dividend this morning for its fully franked 60 cents per share interim dividend. This dividend will now be paid to eligible shareholders in just over seven weeks on 2 July.

Perenti Global Ltd (ASX: PRN)

The Perenti Global share price has crashed 28% lower to 70.5 cents. This follows the release of an operational update this morning by the mining services company. That update reveals that Perenti will no longer be delivering on its guidance for second half revenue and margins in line with what it reported in the first half. Instead, due to the combined impact of COVID-19, Australian labour market shortages, and the stronger Australian dollar, it is expecting softer earnings in the second half. It also expects these headwinds to continue for the next 12 to 18 months.

Xero Limited (ASX: XRO)

The Xero share price has sunk 12% to $118.87. Investors have been selling the cloud-based business and accounting platform provider’s shares following the release of its full year results. Although Xero delivered strong growth on both the top and bottom lines, it was still short of the market’s expectations. In addition to this, weakness in the tech sector is adding to the selling pressure.

More reading

• Is the 11% drop in the Xero (ASX:XRO) share price a buying opportunity?
• Why are ASX tech shares like Afterpay (ASX:APT) crashing today?
• ASX 200 down 0.4%: Xero sinks, Telstra hit with $50m fine
• Here’s why the ABR (ASX:ABR) share price has dived 9%
• The real reason the NAB (ASX:NAB) share price is under pressure today

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Xero. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Now the dust has settled, the Federal Budget has been unmasked. And there’s a little something in it for everyone.

As AMP Capital head of investment strategy and chief economist Shane Oliver says, it’s a “have your cake and eat too” budget.

Speaking at AMP Capital’s Webinar yesterday, Oliver only listed 2 real losers in the Federal Budget. Namely foreign aid recipients and the future generation of taxpayers.

Core highlights of the Federal Budget

Some core highlights of the Federal Budget include:

• $17.7 billion in aged care spending over 5 years 
• An additional $1.7 billion for child-care subsidies over 4 years
• $15 billion more funding for the $110 billion 10-year infrastructure program 
• A $1.2 billion package to support the digital economy

The Federal Budget also flags an increase in spending on preschools, mental health, and additional assistance for first home buyers and single-parent home buyers. Tax cuts are also on the agenda.

According to AMP Capital, the total direct stimulus to the economy (spent and projected) since the early onset of the pandemic has now reached approximately $350 billion.

With that kind of spending the budget deficit is expected to reach 7.8% of Australia gross domestic product (GDP). That’s the highest share of GDP since 1946. Though, as Oliver notes, “At least it’s well down from the 11% projected in last October’s budget.”

Oliver said the government eschewing fiscal austerity and instead focusing its efforts on growing the economy “is the right thing to do at present”.

As for the Aussie dollar, AMP Capital forecasts it will likely top 80 US cents by the end of the year. That’s largely due to strong commodity prices lifting the Aussie dollar at a time of expected weakness for the greenback.

Reasons for optimism

According to the government’s own estimates, the Federal Budget won’t see a return to surplus for 10 years. Economic growth should help reduce the debt burden. But population growth of 0.1% this financial year, the lowest since 1917, will see less money flow into government coffers.

Oliver offered a slightly more optimistic timeline, saying we might see a return to surplus in the Federal Budget in 8 years.

He pointed to the high price of iron ore as supporting corporate income – and the government’s tax take. And he believes the government’s estimate that iron ore will fall to US$55 per tonne by March next year is pessimistic.

I reckon the government is being a bit conservative here. Iron ore’s currently running at US$228 per tonne. And if it stays around US$200 it will add almost $20 billion to government revenue.

Oliver also pointed to the stronger than forecast rebound in the Aussie economy, which has seen JobKeeper eliminated and JobSeeker outlays reduced.

In fact, he said, Australia was one of the very few developed countries where employment is now higher than it was pre-COVID, thanks to the government’s stimulus measures and focus on workers with JobKeeper.

“When we needed it, it was there,” Oliver said. He contrasted Australia with the United States where, despite the US economy running hot, employment is still 5% down from where it was before the pandemic.

Another reason for optimism are the rock bottom interest rates Down Under.

“The rate of interest is below the rate of nominal growth in this country. Historically that tells you that the debt level can be sustained,” he said, adding, “The risk there is if interest rates and bond yields rise dramatically.”

However, Oliver said he wasn’t too concerned about a sustained spike in inflation. Instead, he sees this as a short term (1-year) issue, caused by distortions in supply and demand as the world emerges from the pandemic.

Overall, Australia should also benefit from broader global growth. Oliver said he’s optimistic on 4 fronts: “massive fiscal stimulus and ultra-easy monetary policy”; pent up demand; very high savings rates; and the COVID vaccines are working.

More on Oliver’s take on the Federal Budget’s likely impact on the All Ordinaries Index (ASX: XAO) to come…

More reading

• Top brokers name 3 ASX shares to sell today
• Codan (ASX:CDA) share price wobbles on news of a completed acquisition
• Why GrainCorp, Pro Medicus, Redcape, & Treasury Wine are pushing higher
• Why it might be time to give the TPG (ASX:TPG) and Telstra (ASX:TLS) share price a second look
• Australia eyes Moderna (NASDAQ:MRNA) COVID-19 vaccine delivery

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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On Wednesday I looked at three ASX shares that brokers have given buy ratings to this week.

Unfortunately, not all shares are in favour with them right now. Three ASX shares that have just been given sell ratings by brokers are listed below. Here’s why these brokers are bearish on them:

A2 Milk Company Ltd (ASX: A2M)

According to a note out of Macquarie, its analysts have downgraded this infant formula company’s shares to an underperform rating and cut the price target on them to $5.60. The broker made the move after a2 Milk downgraded its guidance for FY 2021 a fourth time. Looking ahead, the broker has concerns over its uncertain future. Particularly given the increasing competition in the China market from domestic producers. The a2 Milk share price has fallen heavily in recent days and is now trading in line with this price target at $5.60.

Commonwealth Bank of Australia (ASX: CBA)

Analysts at Morgans have retained their reduce rating but lifted their price target on this banking giant’s shares slightly to $73.00. According to the note, Commonwealth Bank delivered a third quarter update ahead of its expectations earlier this week. And while the broker acknowledges that the bank is of a very high quality, it isn’t enough to justify the premium its shares trade at. As a result, it believes its shares are overvalued and has held firm with its reduce rating. The CBA share price is trading at $96.32 this afternoon.

DEXUS Property Group (ASX: DXS)

A note out of Citi reveals that its analysts have retained their sell rating but lifted their price target on this property company’s shares to $8.34. This follows the announcement of an agreement to acquire APN Property Group (ASX: APD). Although the acquisition is expected to boost its earnings, it isn’t enough for a change of rating. Particularly given the company’s significant exposure to offices. Citi fears office rents could suffer due to the working from home trend. The DEXUS share price is fetching $10.90 today.

More reading

• Is the high-flying CBA (ASX:CBA) share price a buy?
• 5 things to watch on the ASX 200 on Thursday
• Goldman says sell Commonwealth Bank (ASX:CBA) shares
• What do the CEOs of the Big Four banks think of the Federal Budget?
• Which ASX bank share is the cheapest after earnings?

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended A2 Milk. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Shares in Codan Ltd (ASX: CDA) have spent most of the morning in the red today on news the company has completed its acquisition of Domo Tactical Communications.

The Codan share price has changed direction this afternoon, however, and is currently trading at $16.90, up 0.33%.

Codan is a communications and technology company that works to create technologies for use in harsh conditions. It produces radios, metal detectors, and mining automation systems which it provides to a number of users including Five-Eyes’ militaries and intelligence agencies.

Let’s take a closer look at the technology company’s latest acquisition.

New acquisition

In today’s release, Codan advised it now owns all shares in United States-based tech company, Domo Tactical Communications.

Codan said the acquisition cost US$88 million in cash, adding it may need to pay another US$16 million if Domo Tactical reached specified earn-out targets before the end of this year.

The US business appears to fit well with Codan’s other communications and technology business ventures.

Domo Tactical is a technology company specialising in high bandwidth wireless communications and MIMO Mesh networks. It also works to create overt and covert surveillance systems, and also builds technological communications systems in challenging environments including public spaces, border control, large sporting events, and war zones.

Codan first announced it was acquiring Domo Tactical in February this year. When the news was announced, the Codan share price hit what was then an all-time high of $13.64 in intraday trade.

Codan purchased Domo Tactical Communications from DTC Management Topco, an entity of Marlin Equity Partners.

Codan Ltd share price snapshot

The Codan share price has wobbled after today’s acquisition news. Long-term shareholders needn’t worry yet though.

The Codan share price is currently up 49% year to date and has gained 152% since this time last year.

Codan has a market capitalisation of around $3 billion, with approximately 180 million shares outstanding.

More reading

• These 3 ASX shares have just hit 52-week highs or better
• The War in Afghanistan is ending. Which ASX companies supply our military?

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned.

The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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In afternoon trade, the S&P/ASX 200 Index (ASX: XJO) is on course to record another disappointing decline. At the time of writing, the benchmark index is down 0.6% to 7,001.2 points.

Four ASX shares that are not letting that hold them back today are listed below. Here’s why they are pushing higher:

Graincorp Ltd (ASX: GNC)

The GrainCorp share price is up 6.5% to $5.49 following the release of its half year results. For the six months ended 31 March, the grain exporter reported an 89% increase in underlying net profit after tax from continuing operations to $51 million. This was driven by a favourable turnaround in growing conditions, which underpinned a 166% increase in East Coast production to 31.4 million metric tonnes.

Pro Medicus Limited (ASX: PME)

The Pro Medicus share price is up 2% to $41.22. Investors have been buying the healthcare technology company’s shares following the announcement of a major new contract win. The healthcare technology company has signed an 8-year deal with The University of Vermont Health Network worth $14 million. Pro Medicus will provide the university with a unified diagnostic imaging platform that replaces multiple legacy PACS platforms.

Redcape Hotel Group Pty Ltd (ASX: RDC)

The Redcape share price has risen 4.5% to $1.02. This morning the pub and hotel operator upgraded its distribution guidance for FY 2021 following a strong third quarter. Redcape Hotel now expects to increase its full year distribution to 8.16 cents per share. This represents an 11.5% uplift versus its previous guidance.

Treasury Wine Estates Ltd (ASX: TWE)

The Treasury Wine share price is up 3% to $10.23 following the release of its investor day update. According to the release, the wine company is expecting its earnings before interest, tax, and SGARA (EBITS) to be in the range of $495 million to $515 million. This was ahead of the market consensus estimate for EBITS.

More reading

• The Redcape (ASX:RDC) share price is flying 5% higher today. Here’s why
• ASX 200 down 0.4%: Xero sinks, Telstra hit with $50m fine
• The Treasury Wine (ASX:TWE) share price lifts 4% on earnings update
• Pro Medicus (ASX:PME) share price sinks despite new deal
• Why the GrainCorp (ASX:GNC) share price will be on watch today

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Pro Medicus Ltd. The Motley Fool Australia owns shares of and has recommended Treasury Wine Estates Limited. The Motley Fool Australia has recommended Pro Medicus Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Why GrainCorp, Pro Medicus, Redcape, & Treasury Wine are pushing higher appeared first on The Motley Fool Australia.

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The TPG Telecom Ltd (ASX: TPG) and Telstra Corporation Ltd (ASX: TLS) share price could be a buy after Federal Budget tailwinds. At least, that’s what Morgan Stanley thinks.

Budget spending to drive to support Australia’s digital economy

The Australian Government’s 2021-22 Federal Budget features $1.2 billion in government spending over six years as part of its Digital Economy Strategy.

Several funding measures acknowledge the importance of mobile telecommunications and broadband infrastructure to the digital economy. This includes: 

• $31.7 million over four years from 2021-22 to enhance the security of Australia’s mobile networks and accelerate the commercialisation of sovereign network and data security solutions;
• $16.4 million over three years from 2021-22 to establish a Peri-Urban Mobile Program to improve mobile phone reception in peri-urban fringe areas that are prone to bushfires; and
• $7.7 million over four years from 2021-22 for the Australian Competition and Consumer Commission to continue and extend the Measuring Broadband Australia program, which will be extended to cover fixed wireless broadband services.

The budget also allocated funding support to improve Australia’s technology workforce, focusing on artificial intelligence, emerging technologies and cybersecurity. 

Why Morgan Stanley thinks TPG and Telstra share price could be a buy

The Federal Budget reaffirmed Morgan Stanley’s view of the cyclical and structural tailwinds driving the technology, media and telecom sector. 

In the context of TPG and Telstra, the broker highlights the small boost to the funding of mobile networks. 

Today, the broker retained an overweight rating and $4.00 target for the Telstra share price. Telstra shares have made a solid start to 2021, up 15% year-to-date and currently trading at $3.48. 

Morgan Stanley also retained an overweight rating for TPG shares with a $9.75 target price. TPG shares have slipped 25% year to date, driven by the resignation of its founder, David Teoh and CFO Stephen Banfield. The optimistic target price would represent an upside of more than 80%, given TPG’s current share price of $5.26. 

More reading

• ASX 200 down 0.4%: Xero sinks, Telstra hit with $50m fine
• Telstra (ASX:TLS) share price higher despite being hit with $50 million penalty
• Why has the Telstra (ASX:TLS) share price retreated from its 52-week high?
• TPG Telecom (ASX:TPG) share price storms higher on insider buying news
• Brokers name 3 ASX shares to buy now

Motley Fool contributor Kerry Sun has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Why it might be time to give the TPG (ASX:TPG) and Telstra (ASX:TLS) share price a second look appeared first on The Motley Fool Australia.

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The Moderna Inc (NASDAQ: MRNA) share price backtracked overnight (Aussie time), despite the company announcing a landmark deal with the Australian Government.

The United States-based pharmaceutical giant’s shares failed to tread into positive territory, instead sinking almost 4% to US$152.68.

What deal did Moderna make?

The Australian federal government has signed a new deal with Moderna to deliver 25 million COVID-19 vaccines.

This comes at a crucial time during which the AstraZeneca vaccine has been linked to a number of rare, blood-clotting cases across the world. Since then, the Australian Government has mandated that people under 50 years of age in Australia should instead receive the Pfizer jab.

Under the Moderna agreement, the first 1 million COVID-19 doses are set to be received in Australia this September. The following 9 million vials are expected to arrive later in December. Both shipments however are reportedly effective only against the original COVID-19 variant.

The remaining 15 million mRNA vaccines are being planned for 2022 and will contain boosters to fight more recent strains of the virus.

Moderna noted that it will shortly submit an application to the Australian Therapeutic Goods Administration (TGA) for regulatory approval.

Assuming the TGA gives the green light, this will provide Australians with another COVID-19 vaccine option. Currently, the country only offers the AstraZeneca and Pfizer vaccine to the population.

The mRNA vaccine is currently being rolled out across the United States, Canada, the European Union, the United Kingdom, and Singapore.

What about local production?

In further news, Australian Health Minister Greg Hunt said the government will commence discussions with the private sector about locally producing the mRNA vaccines. This is most likely to include global biotech giant, CSL Limited (ASX: CSL) which has previously indicated it’s open to such an initiative.

Moderna has also flagged it’s open to the idea of Australia manufacturing its vaccine formula locally. 

Moderna CEO, Stephane Bancel commented:

As we seek to protect people around the world with our COVID-19 vaccine and potentially our variant booster candidates, we look forward to continuing discussions with Australia about establishing potential local manufacturing opportunities.

While the government has shied away from setting new vaccination targets, it is encouraged by more Australians being open to receiving the jab.

As of today, over 2.8 million Australians have been administered their COVID-19 vaccines, averaging around 350,000 people per week.

Moderna share price summary

Over the past 12 months, Moderna shares have accelerated, buoyed by the company’s successful COVID-19 vaccine production. The Moderna share price reached a 52-week high of US$189.26 in March, before trending lower to its current level. 

Moderna commands a market capitalisation of roughly $61 billion, with more than 401 million shares on issue.

More reading

• What the Federal Budget could mean for CSL (ASX:CSL) shares
• Pfizer and BioNTech’s COVID-19 vaccine authorized by the FDA for adolescents
• The ASX shares poised to benefit from new spending in the 2021 federal budget
• Is the CSL (ASX:CSL) share price a clear buy?
• 2 fantastic ASX 50 shares that could be in the buy zone

Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Moderna Inc. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Australia eyes Moderna (NASDAQ:MRNA) COVID-19 vaccine delivery appeared first on The Motley Fool Australia.

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The Xero Limited (ASX: XRO) share price has come under significant pressure on Thursday.

In morning trade, the cloud-based business and accounting platform provider’s shares were down as much as 11.5% to $119.16.

At the time of writing, the Xero share price has recovered to be down 7.5% at $124.76.

Why is the Xero share price under pressure?

There have been a couple of catalysts for today’s weakness in the Xero share price.

The first is weakness in the tech sector following another selloff on the tech-focused Nasdaq index overnight.

At the time of writing, the S&P/ASX All Technology Index (ASX: XTX) is down a disappointing 2.5%.

What else is weighing on its shares?

Also weighing on the Xero share price today was the release of its full year results this morning.

For the 12 months ended 31 March, Xero reported an 18% increase in revenue to NZ$848.8 million and a 39% jump in earnings before interest, tax, depreciation and amortisation (EBITDA) to NZ$191.2 million.

While this was a strong result, particularly in the current environment, it has fallen short of the market’s expectations.

The consensus estimate was for revenue of NZ$854 million and EBITDA of NZ$228 million. This means Xero has fallen short of expectations by 0.7% and 16.2%, respectively, with its result.

Also potentially weighing on its shares was management’s commentary on its margins for next year. It is forecasting total operating expenses (excluding acquisition integration costs) as a percentage of operating revenue to be in a range of 80% to 85%. This compares to 70.4% during the first half of FY 2021.

And while the latter part of the range is higher than normal, the lower end of the range is roughly in line with previous years. Furthermore, it is worth noting that the first half figure was far lower than normal due to significant cost management during the height of the pandemic.

Is this a buying opportunity?

According to a note out of Goldman Sachs, its analysts appear to believe the weakness in the Xero share price is a buying opportunity.

While the broker hasn’t yet fully digested the result and updated its recommendation, it spoke positively about it.

Goldman said: “Overall we view the FY21 result as a positive, with Xero showing earlier than expected subscriber traction across all of its key international markets, but without sacrificing unit economics. As a result, we believe the accelerated investment is more than justified, given the enormous TAM the company is targeting.”

Goldman Sachs currently has a buy rating and $153.00 price target on its shares. Based on the current Xero share price, this implies potential upside of almost 23% over the next 12 months.

More reading

• Why are ASX tech shares like Afterpay (ASX:APT) crashing today?
• ASX 200 down 0.4%: Xero sinks, Telstra hit with $50m fine
• Xero (ASX:XRO) share price on watch after delivering strong growth in FY 2021
• 5 things to watch on the ASX 200 on Thursday
• Nasdaq slump: will ASX tech shares face selling pressure today?

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Xero. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Is the 11% drop in the Xero (ASX:XRO) share price a buying opportunity? appeared first on The Motley Fool Australia.

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Well, one of the biggest pieces of news on the ASX share market today is the performance of ASX tech shares. Long story short, it’s not shaping up to be a good day. The entire tech sector is currently being smashed. The S&P/ASX All Technology Index (ASX: XTX) is currently down 2.2% to 2,534 points at the time of writing. That’s its lowest level since November last year.

But some of the ASX’s more prominent tech shares are faring far worse. Afterpay Ltd (ASX: APT) is down a nasty 5% to $8.68 a share, a level not seen since October last year. The buy now, pay later (BNPL) giant has now lost roughly half of its market capitalisation since peaking at $160 back in early February. Xero Limited (ASX: XRO) has also shed around 7.4% and is going for $124.96 right now. And Nuix Ltd (ASX: NXL) continues to explore new lows today. Now Xero’s move isn’t being helped by the company’s full-year results which were released to investors before market open this morning. Despite an 18% increase in revenue and a 20% increase in subscribers, it seems investors weren’t too impressed that these numbers weren’t as high as some analysts were expecting.

But that can’t explain the malaise across the entire tech space today. So what gives?

Well, the market’s formerly dormant fears over inflation and interest rate hikes appear to be reawakening with a passion. Until the start of 2021, investors had shown a penchant for high-growth, midcap shares in the tech space. Some of these shares, like Afterpay and Xero, were some of the best ASX performers last year. Aside from the initial onset of the pandemic of course. But these companies which led the ASX share market recovery last year appear to be the first shares that investors are looking to jettison. Why? Well, it might all come back to the ‘inflation’ thing.

America first: US leads tech share sell-off

This is more of a concern over in the United States right now than here. The US markets are coming down from a government spending high. After the passage of the mammoth US$1.9 trillion COVID stimulus bill a couple of months ago, the new Biden administration has now proposed a number of additional spending plans. These involve infrastructure spending, climate change action, and increasing assistance to state and local governments.

All of these plans have sparked concerns over inflation. And these fears are ramping up. According to a report in the Australian Financial Review (AFR) today, consumer prices in the US increased in April at the highest pace since 2009 at 0.9% for the month. This reportedly exceeded the highest estimations that economists had been predicting. Annualised, it points to a 4.2% increase in prices, the highest since 2008.

These exexpectedly strong figures have pushed up government bond yields. According to CNBC, the 10-year US treasury bill was yielding around 1.56% a week ago. It’s at 1.68% today. This indicated the market is pricing in future inflation – and interest rate hikes.

And that’s bad news for tech companies. The US has seen mid-cap tech shares smashed over the past week or so. Stocks like Zoom Video Communications Inc (NASDAQ: ZM), Tesla Inc (NASDAQ: TSLA) and Coinbase Global Inc (NASDAQ: COIN) have all sold off heavily. The shenanigans going on with Elon Musk and Bitcoin (CRYPTO: BTC) that my Fool colleague Brooke Cooper covered earlier today probably isn’t helping either. And this sentiment appears to be spilling over into the ASX tech space. That’s despite the Australian economy not facing the same kinds of inflationary concerns right now. But such is the way of these things.

More reading

• Tesla stops taking Bitcoin payments over fossil fuel concerns
• ASX 200 down 0.4%: Xero sinks, Telstra hit with $50m fine
• Xero (ASX:XRO) share price on watch after delivering strong growth in FY 2021
• 3 buy rated mid cap ASX shares for the long term
• 5 things to watch on the ASX 200 on Thursday

Sebastian Bowen owns shares of Coinbase Global, Inc., Tesla, and Zoom Video Communications. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Tesla and Zoom Video Communications. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Xero. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Nuix Pty Ltd. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Nuix Pty Ltd and Zoom Video Communications. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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