Australian shares set to drop after Wall Street stumble

The news: The Australian sharemarket is expected to drop on Friday after higher-than-expected US inflation data weighed on Wall Street, prompting a decline for major US indices.

The numbers: The Dow Jones index ended 0.32% lower, the broader S&P 500 lost 0.27% and the tech-heavy Nasdaq fell 0.30%. In the local market, ASX 200 futures were down 56 points or 0.73% at 7665 points at 7:00am AEDT on Friday.

The context: US stocks dropped on Thursday as a jump in producer prices left investors wondering if the Federal Reserve might wait longer than expected to cut interest rates. Data showed US producer prices increased 0.6% in February, much higher than the 0.3% expectation, as the cost of goods like gasoline and food surged. Rate-sensitive utilities and real estate were among the day's weakest sectors.

The Fed is expected to leave rates unchanged at its policy meeting next week but the market has also trimmed the odds of a cut at its June meeting to 62.9% from 81.7% a week ago, CME's FedWatch Tool showed.