The ASX is set for a weaker open on Thursday, with futures pointing down about 48 points (-0.53%) at 9:45 am AEST after a volatile overnight session in which surging oil prices and a divided Federal Reserve unsettled global markets.
The softer lead follows a seventh straight daily decline for the S&P/ASX 200, which fell 0.27% on Wednesday as investors digested a hotter headline inflation print and rising expectations of further rate hikes.
Wall Street mixed as Fed decision clouds outlook
US markets finished mixed overnight, with the S&P 500 and Nasdaq effectively flat (down 0.04% and up 0.04%, respectively) while the Dow Jones fell more sharply (-0.57%), reflecting a lack of clear direction following the Federal Reserve’s latest decision.
The Fed held rates steady at 3.50–3.75% as expected, but the tone of the meeting drew attention. An 8–4 vote split marked the highest level of dissent in decades, with disagreement not just over the policy stance but also how the outlook was framed.
That uncertainty spilled into markets, with bond yields rising and equities struggling to build momentum. While strong earnings from several Mag7 companies — Alphabet, Amazon, Meta and Microsoft — helped steady sentiment, gains were uneven and largely confined to a narrow group of names.
Oil surge dominates sentiment
Energy markets remain the key driver of global sentiment.
Brent crude surged more than 7% to above US$112 a barrel, its highest level since 2022, as tensions in the Middle East escalated and hopes for a near-term resolution faded.
The move followed reports that the US had rejected Iran’s latest proposal to reopen the Strait of Hormuz, while signalling it is prepared to maintain — and potentially escalate — its naval blockade.
That backdrop is keeping markets on edge. Higher oil prices are feeding directly into inflation concerns, complicating the outlook for central banks already grappling with persistent price pressures.
Commodities and currencies
Commodity markets reflected that shift in tone.
- Crude surged to multi-week highs, with WTI trading above US$108 a barrel
- Gold fell more than 1% to around US$4,550/oz as yields rose
- Copper dropped sharply, down nearly 2%, pointing to softer growth expectations
The divergence underscores the competing forces at play — supply-driven energy strength versus weakening sentiment in industrial metals.
Currency markets were relatively steady. The Australian dollar held near US$0.711, though it has softened against the stronger US dollar in recent sessions.
Bond markets saw a clear move higher in yields, with the US 10-year rising to around 4.42%, while volatility picked up, with the VIX climbing towards 19.
ASX extends losing streak as inflation bites
Locally, the ASX 200 slipped for a seventh consecutive session on Wednesday, continuing its longest losing streak in months.
The decline reflected a somewhat mixed reaction to inflation data. Headline CPI accelerated to 4.6% year-on-year, driven largely by higher fuel costs, while the core measure came in slightly softer than expected.
Sector performance was uneven:
- Utilities rebounded strongly after recent weakness
- Energy stocks moved higher in line with oil prices
- Healthcare remained under pressure, leading declines
The session reflected a market still trying to reconcile rising headline inflation with signs that underlying price pressures may be stabilising.
What to watch today
A heavy global and domestic calendar will keep markets busy.
- Central banks: Policy decisions from the Bank of England and European Central Bank are due tonight
- Economic data: China PMI and US core PCE inflation will provide key reads on global demand and price pressures
- Energy markets: Oil remains the dominant swing factor for sentiment
Locally, a busy reporting day is expected, with updates from major retailers and resource companies likely to drive stock-specific moves.
After a sustained pullback, markets remain highly sensitive to macro developments. For now, the combination of rising energy costs, policy uncertainty and geopolitical risk is keeping sentiment fragile, even as pockets of strength persist beneath the surface.