Australian shares are set to slide after Wall Street retreated from record highs, with rising US Treasury yields and renewed volatility in oil prices weighing on investor sentiment. Futures pointed to a fall of 58 points, or 0.7 per cent, for the ASX at the open, while the Australian dollar was trading at US69.66¢.
The S&P 500 slipped 0.2 per cent in New York, a day after reaching a fresh record above its previous high from August. The Dow Jones Industrial Average fell 284 points, or 0.6 per cent, in early afternoon trading, while the Nasdaq composite was down 0.4 per cent.
Higher borrowing costs were a key source of pressure. The yield on the 10-year US Treasury rose to 5.28 per cent, from 5.27 per cent late on Tuesday, after reaching as high as 5.36 per cent before easing following a US$39 billion auction.
Bond yields have been pushed higher by concerns over the scale of government debt in the US and elsewhere. Rising yields can weigh on share prices and make borrowing more expensive for households and businesses, potentially slowing economic activity.
Oil prices remain volatile amid Iran uncertainty
Brent crude, the international benchmark, fell 0.6 per cent to US$99.93 a barrel after briefly moving above US$100. Prices remain well above the US$72 level recorded before the war with Iran began, although they are below the almost US$110 reached last month.
Investors are also assessing the outlook for corporate profits as the latest earnings season approaches. Analysts surveyed by FactSet are forecasting earnings-per-share growth of nearly 30 per cent, raising the prospect of further falls in share prices if companies fail to meet expectations.
Worthington Steel was among the weaker performers on Wall Street, dropping 8.8 per cent after the metals processing and manufacturing company reported quarterly results below analysts’ expectations.
Constellation Brands gained 2 per cent after the seller of Modelo beer and Robert Mondavi wine posted stronger quarterly profits than expected. Its advance was limited after the company gave a full-year profit outlook whose midpoint was below analysts’ forecasts.
European markets also fell, with France’s CAC 40 down 1.2 per cent as French bond yields resumed their rise amid renewed concerns over government debt and a strained budget. Protests across France have increased pressure on the government to raise spending, which could add to its debt.
South Korea’s Kospi fell 2 per cent, led lower by a sharp decline in SK Hynix. Stock indexes dropped across much of Europe and Asia as investors responded to the combination of elevated yields, expensive energy and concerns about the global economic outlook.
Kristalina Georgieva, managing director of the International Monetary Fund, said record government debt was one of three major forces shaping the global economy, alongside artificial-intelligence technology and high energy prices.
“Some very tough political choices stare us in the face,” Ms Georgieva said in a speech in Singapore ahead of the autumn meetings of the IMF and World Bank in Bangkok next week.
