Australian stocks set to drop after Wall Street losses

The news: The Australian sharemarket is set to open weaker, tracking losses on Wall Street where stronger-than-expected economic data renewed concerns about interest rates.

The numbers: The US non-manufacturing Purchasing Managers' Index for August rose to 54.5 against expectations of 52.5, prompting the Dow Jones index to fall 0.57% and the broader S&P 500 to close 0.70% lower, while the tech-heavy Nasdaq lost 1.06%. In the local market, ASX 200 futures were trading 35 points or 0.48% lower at 7196 points at 7:00am AEST on Thursday.

The context: The stronger-than-expected US services sector data fuelled concerns that still sticky inflation would mean that interest rates stay higher for longer. While traders are still betting on a pause in interest rate hikes at the US central bank’s September meeting, the likelihood of a pause in November has dropped slightly. In the local market, investors will be paying attention to a speech by RBA Governor Philip Lowe, his last before he steps down next week.