The ASX is set for a softer start on Wednesday, with futures pointing down about 25 points (-0.29%) at 9:30 am AEST after hotter-than-expected US inflation data pushed bond yields higher and triggered a pullback across technology stocks overnight.
The weaker lead follows another uneven local session on Tuesday, when the S&P/ASX 200 fell 0.36% as gains in miners and utilities were outweighed by selling across banks, healthcare and growth stocks ahead of the Federal Budget.
Wall Street loses momentum after inflation surprise
US markets finished mixed overnight as investors reassessed the outlook for interest rates following another strong inflation print.
The S&P 500 slipped 0.16% and the Nasdaq lost 0.71%, while the Dow Jones edged modestly higher after recovering from steeper early declines.
April CPI came in above expectations at 3.8% year-on-year — the highest reading since mid-2023 — while core inflation also ran hotter than forecast, reinforcing concerns that price pressures remain stubborn despite higher interest rates.
Bond markets reacted quickly, with US Treasury yields climbing as traders further wound back expectations for Federal Reserve rate cuts this year.
Technology and semiconductor stocks led the declines after an extended rally in AI-linked names. Intel dropped about 7%, Micron lost roughly 4% and broader chip indices fell sharply as investors locked in profits following a powerful six-week run.
Still, the broader market avoided a deeper sell-off, with defensive sectors including healthcare, staples and financials helping stabilise the session later in the day.
Oil and copper surge as geopolitical risks persist
Commodity markets remained highly volatile overnight, with both oil and copper extending their recent rallies. Brent crude pushed above US$107 a barrel and WTI crude topped US$102 a barrel on heightened concerns around supply disruptions through the Strait of Hormuz.
Reports suggest negotiations between the US and Iran remain stalled, while military activity between Israel and Hezbollah has continued despite ceasefire efforts in Lebanon.
Copper surged to another record high, climbing above US$14,000 a tonne amid ongoing supply constraints and strong demand expectations linked to electrification and AI infrastructure.
Meanwhile, Gold eased slightly but remained above US$4,700 per ounce.
The move higher in copper continued to support global mining stocks overnight, with US-listed BHP and Rio Tinto both finishing stronger despite broader equity market weakness.
Currency markets were relatively stable. The Australian dollar held near US$0.724 despite a firmer US dollar and rising Treasury yields.
Meanwhile, volatility remained contained, with the VIX finishing below 18 even as equities struggled for direction.
ASX pressured by banks and tech as miners rally
Locally, Tuesday’s session highlighted the growing divergence within the Australian market.
Materials was again the standout sector, lifted by the continued surge in copper and renewed strength across lithium stocks.
Elsewhere, the mood was more defensive.
Technology stocks came under heavy pressure, while healthcare extended recent losses following CSL’s guidance downgrade earlier in the week. Financials also weakened as investors positioned cautiously ahead of the Federal Budget and its proposed changes to capital gains tax and negative gearing rules.
Budget reforms reshape local focus
Treasurer Jim Chalmers delivered a Budget on Tuesday night that leans heavily into housing and tax reform, including substantial changes to the treatment of capital gains and investment properties.
The government will limit negative gearing concessions to newly built homes from July 2027, while replacing the 50% capital gains tax discount with an inflation indexation model and a 30% minimum tax rate on real gains.
Markets will now begin assessing how the reforms could affect banks, housing-related sectors and broader investment flows over the medium term.
What to watch today
Copper miners and broader materials stocks are likely to remain in focus after another powerful move higher in base metals overnight.
Locally, investors will also be watching Commonwealth Bank’s quarterly update, while wage price data due at 11:30 am AEST could shape expectations around the RBA’s policy outlook.
Globally, attention remains firmly on inflation, interest rates and the evolving geopolitical backdrop as markets continue rotating away from expensive growth stocks and back towards commodities and defensives.