Australian shares set to start lower after Wall Street decline

The news: The Australian sharemarket is set to open lower after major indices on Wall Street snapped their winning streak, spooked by hawkish comments from Federal Reserve chair Jerome Powell.

The numbers: The Dow Jones index ended 0.65% lower, while the broader S&P 500 lost 0.81%, and the tech-heavy Nasdaq dropped 0.94%. In the local market, ASX 200 futures were trading 5 points or 0.07% lower at 7017 points at 8:00am AEDT on Friday.

The context: Stocks snapped the longest winning streaks for the Nasdaq and S&P 500 in two years, as Treasury yields climbed after a disappointing auction of 30-year bonds and comments from Powell, who said Fed officials "are not confident" interest rates are high enough to tame inflation. Equities have rallied on softening economic data and as U.S. Treasury yields retreated from multi-year highs on the view that the Fed's most recent policy meeting signalled the central bank was done with its rate hike cycle. Most traders are still betting the Fed will keep interest rates unchanged this year, but they now see rates cuts starting later in 2024.

What they said: Powell is "taking a hawkish viewpoint again," said Peter Cardillo, chief market economist at Spartan Capital Securities in New York told Reuters. "He's reassuring the market that the fight against inflation has not been won a and if economic conditions warrant, they won't hesitate to hike rates again. If you add up all the remarks, Powell is telling the market not to get too complacent and that’s putting some pressure on stocks," he said.