Australian shares set to drop after declines on Wall St

The news: The Australian sharemarket is set to start sharply lower after all major indices lost ground overnight on Wall Street as bond yields rose amid growing risk aversion.

The numbers: The Dow Jones index fell 1%, while the broader S&P 500 lost 1.35% and the tech-heavy Nasdaq ended 1.62% lower. In the local market, ASX 200 futures were trading 83 points or 1.17% lower at 7018 points at 0700 AEDT on Thursday.

The context: US Treasury yields edged up to near 16-year highs after data showed U.S. homebuilding rebounded in September, stoking the view that the Federal Reserve will keep interest rates higher for longer. At the same time, mounting tensions in the Middle East stoked risk aversion even as traders kept an eye on a mixed bag of quarterly earnings. In the local market, investors are awaiting the release of employment data for September at 1130 AEDT to assess the likely path for Australia’s interest rates.