Australian stocks set to drop after Wall Street falls

The news: The Australian sharemarket is set to start lower after a sharp drop on major US indices overnight following renewed concerns over interest rates and a potential downgrade of banks.

The numbers: The Dow fell 1.02%, while the broader S&P 500 lost 1.16% and the tech-heavy Nasdaq dropped 1.14% after data showed US retail sales grew 0.7% last month against expectations of a 0.4% rise. ASX 200 futures were trading 75 points or 1.04% lower at 7168 points at 0700 AEST.

The context: The stronger-than-expected US retail sales data suggests the US economy remains strong, raising the prospect of interest rates staying at the current high levels longer than anticipated. A report citing a potential downgrade of banks by rating agency Fitch added pressure on banking stocks while disappointing economic data from China dampened sentiment further. Local investors are likely to be watching key earnings including Dexus, Mirvac, Transurban and Yancoal.