Australian shares set to drop after Wall Street selloff

The news: The Australian sharemarket is set to start sharply lower, tracking losses on Wall Street on Friday where worries over interest rates and the Israel-Hamas conflict prompted broad-based selling.

The numbers: The Dow Jones index fell 0.86%, the broader S&P 500 lost 1.26% while the tech-heavy Nasdaq dropped 1.53%. In the local market, ASX 200 futures were trading 65 points or 0.94% lower at 6846 points at 0700 AEDT on Monday.

The context: The benchmark US 10-year Treasury yield eased, but investors continued to be wary in the wake of comments by Federal Reserve Chair Jerome Powell who said the US economy's strength and tight labour markets could require tougher borrowing conditions to control inflation. They are also worried the Middle East conflict could spread as Israeli air strikes intensified in Gaza. In the local market, traders will be focused this week on a speech by RBA Governor Michelle Bullock and inflation data on Wednesday that could be crucial in determining prospects for a rate hike in November.