Australian shares set to jump after rally on Wall Street

The news: The Australian sharemarket is set to start sharply higher after an overnight rally on Wall Street on hopes the US Federal Reserve has reached the end of its interest rate hiking campaign.

The numbers: The Dow Jones index rose 1.7%, the broader S&P 500 gained 1.89%, while the tech-heavy Nasdaq added 1.79%. In the local market, ASX 200 futures were trading 85 points or 1.23% higher at 6992 points at 0700 AEDT on Friday.

The context: The gains for major US indexes came a day after Fed Chair Jerome Powell left the door open to more tightening but also acknowledged the impact of a recent surge in bond yields on the economy. His comments were viewed as hints that the central bank is done with its rate hikes, sending longer-dated US Treasury yields tumbling, which supported stocks. Markets also got a boost from a spate of better-than-expectated earnings reports including Starbucks, Qualcomm and Paypal.