Australian shares to track Wall Street falls as rate cut hopes dim
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The news: The Australian sharemarket is set to track sharp falls on Wall Street after hotter-than-expected US inflation data dimmed hopes that the Federal Reserve would begin cutting interest rates as early as June.
The numbers: The Dow Jones index closed 1.09% lower while the broader S&P 500 lost 0.95% and the tech-heavy Nasdaq dropped 0.84%. In the local market, ASX 200 futures were down 65 points or 0.82% to 7828 points at 7:00am AEST on Thursday.
The context: US stocks tumbled after data showed consumer prices increased by a higher-than-expected 3.5% in March, their biggest gain in six months.
Minutes from the Fed's March policy meeting also reflected concerns that inflation's progress toward the central bank’s 2% target might have stalled, and higher interest rates may need to be maintained for longer than anticipated.
Equity prices were further pressured by benchmark Treasury yields, which breached 4.5% to touch the highest level since November. Financial markets are now pricing just a 16.5% likelihood of a 25 basis point Fed rate cut in June, down from 56.0% just prior to the inflation report.
What they said: "Just a week ago [Fed Chairman Jerome] Powell hinted at three cuts. One has to wonder if his opinion has changed after the stubborn data we continue to see," Ryan Detrick, chief market strategist at Carson Group in Omaha, told Reuters.
The source: Reuters
