Australian shares set to drop, tracking Wall Street losses
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The news: The Australian sharemarket is set to fall in early trading, following leads from Wall Street where concerns on the scale and timing of interest rate cuts weighed on stocks.
The numbers: The Dow Jones index ended 1.06% lower while the broader S&P 500 lost 0.74% and the tech-heavy Nasdaq dropped 0.58%. In the local market, ASX 200 futures were down 52 points or 0.68% to 7,640 points at 7:00am AEST on Thursday.
The context: US stocks fell after the yield on the benchmark 10-year US Treasury note climbed to a four-week high of 4.6%, extending Tuesday's gains, after weak debt auctions. It comes amid concern over the timing and scale of possible interest rate cuts from the Federal Reserve.
Stocks held their losses following the release of a US Fed survey which showed US economic activity continued to expand from early April through mid-May, while inflation increased at a modest pace.
Conflicting expectations on the size and the timing of potential interest rate cuts have kept the market on edge since the start of this year. Sticky inflation and hawkish comments from central bankers have forced traders to temper down rate cut expectations to only one by November or December, from multiple cuts expected at the start of the year.
That sentiment has also fed into investor concerns in the local market, where stagnant inflation is set to push rate cuts to next year.
The source: Reuters
