The Australian sharemarket is set to fall at the open after Wall Street retreated from record highs amid rising bond yields and renewed volatility in oil prices.
ASX futures were pointing to a decline of 53 points, or 0.6 per cent, while the Australian dollar was trading at US69.66 cents. The Australian market had also edged lower in the previous session.
In New York, the S&P 500 fell 0.2 per cent, a day after reaching a new all-time high. The Dow Jones Industrial Average dropped 341 points, or 0.7 per cent, while the Nasdaq composite slipped 0.2 per cent from its record.
Investors were focused on movements in the US bond market, where the yield on the 10-year Treasury climbed as high as 5.36 per cent, up from 5.27 per cent late on Tuesday and close to its highest level since 2002.
Higher yields can weigh on share prices by making bonds more attractive, while also increasing borrowing costs for households and businesses. The 10-year yield later eased to 5.28 per cent after the US Treasury sold $US39 billion of 10-year notes at an auction where the median yield was below 5.26 per cent.
Oil prices also swung sharply as uncertainty continued over when the industry will return to normal amid the war with Iran. Brent crude rose above $US102 a barrel before settling at $US100.20, down 0.4 per cent.
Although Brent remains below the almost $US110 reached last month, it is still well above the $US72 level recorded before the war began. The International Energy Agency said its members supported accelerating the release of oil from inventories announced earlier this year, with particular emphasis on diesel fuel.
Debt concerns add to pressure on markets
Bond yields have also been pushed higher by concerns over the scale of government debt in the United States and elsewhere, as well as the prospect of further borrowing.
International Monetary Fund managing director Kristalina Georgieva 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, pointing to France and Italy among European countries facing high debt.
France’s CAC 40 fell 1.2 per cent after French bond yields resumed their rise amid concern over government debt and a strained budget. Protests across the country have increased pressure on the government to raise spending, potentially adding to its debt.
Investors are also looking ahead to the latest corporate earnings season, with analysts forecasting almost 30 per cent growth in earnings per share, according to FactSet. Companies may come under pressure if their results fail to meet those expectations while higher interest rates weigh on valuations.
Worthington Steel fell 6.9 per cent after reporting weaker quarterly results than analysts had expected. Constellation Brands gained 2.4 per cent after beating profit forecasts, although its full-year outlook was limited by a projected profit range whose midpoint was below market expectations.
The S&P 500 fell 17.16 points to 7,801.77, the Dow dropped 341.41 points to 51,179.87 and the Nasdaq composite lost 61.20 points to 27,538.69.
Markets also declined across much of Europe and Asia. South Korea’s Kospi dropped 2 per cent after a sharp fall in SK Hynix, one of the country’s two dominant stocks.
