Australian shares to start lower on Wall Street slide, geopolitical fears

The news: The Australian sharemarket is set to start sharply lower after tepid earnings from major US banks weighed on Wall Street on Friday and as tensions escalate in the Middle East.

The numbers: The Dow Jones index closed 1.24% lower while the broader S&P 500 lost 1.46% and the tech-heavy Nasdaq dropped 1.62%. In the local market, ASX 200 futures were down 50 points or 0.64% to 7772 points at 7:00am AEST on Monday.

The context: US stocks sold off on Friday after major US banks' results failed to impress, capping a week marked by market-moving inflation data and looming geopolitical tensions. Hotter-than-expected inflation has prompted investors to reset expectations about the timing and extent of the US Federal Reserve's rate cuts this year.

Geopolitical tensions have added to the nervous sentiment. On Sunday, Iran launched more than 200 drones and missiles at Israel in retaliation for the latter’s 1 April airstrike on its embassy in Damascus. Investors are worried that if the tensions escalate, it would keep energy prices elevated and make it harder for central banks to cut rates this year.