Australian shares are set to open lower on Wednesday, with ASX futures down 39 points, or 0.5%, to 8600 after Wall Street retreated overnight as US bond yields hit their highest levels since before the global financial crisis.
The decline came despite a Bank of America global fund manager survey showing investors remain bullish on equities, with a record increase in stock allocations and a sharp fall in cash holdings amid optimism around earnings growth and expectations for higher interest rates.
The benchmark S&P 500 closed down 0.7% at 7353.61, ending near session lows, while the Dow Jones fell 0.7% and the Nasdaq slipped 0.8%. Materials and communication services weighed on the market.
The US 30-year Treasury yield rose as much as 7 basis points to 5.19%, its highest level since 2007, fuelling concerns about persistent inflation pressures and tighter financial conditions.
Oil prices remained elevated, with Brent crude holding above US$111 a barrel despite easing slightly after comments from US Vice President JD Vance citing progress in Iran negotiations.
ASX rebounds from seven-week low
Australian equities rebounded strongly on Tuesday after US President Donald Trump delayed further military strikes on Iran, easing fears of escalating conflict in the Middle East and helping stabilise oil prices and bond markets.
The S&P/ASX 200 rose 99.4 points, or 1.2%, to close at 8604.7, with nine of the 11 sectors finishing higher.
Brent crude fell 1.5% to US$110.40 during the local session after Trump said planned strikes had been called off following appeals from allies, adding that “serious negotiations are now taking place”.
Minutes from the Reserve Bank of Australia’s May meeting also supported sentiment, showing policymakers believed the current 4.35% cash rate provided “space to see” how higher rates were affecting inflation and the economy.
Global X ETFs senior investment strategist Marc Jocum said investors had welcomed the de-escalation in geopolitical tensions.
“Investors are breathing a sigh of relief after Donald Trump delayed further strikes on Iran, which has calmed nerves about fresh conflict in the region and lifted risk sentiment,” he said.
“The ASX still feels range-bound, with 8500 shaping up as an important floor for momentum, while a move back towards 9000 remains the next major hurdle.”
Consumer staples lead gains
Consumer staples was the best-performing sector, led by Woolworths Group Ltd after JPMorgan upgraded the supermarket giant to “overweight”.
Woolworths shares rose 3.7% to $34.21, while Coles Group Ltd gained 2.7% to $21.41 after retaining an “overweight” rating.
Communication services stocks also rallied, with Telstra Group Ltd climbing 2.6% to $5.55.
Tuas Ltd surged 17.6% to $2.67 after Singapore’s regulator said its mobile phone brand may have breached local laws, helping the stock rebound from Monday’s sharp sell-off.
The major banks were broadly stronger, led by National Australia Bank Ltd, up 2% to $37.04. Westpac Banking Corporation rose 1.9% to $36.39, ANZ Group Holdings Ltd added 1.3% to $35.52 and Commonwealth Bank of Australia gained 1.3% to $162.88.
Technology lags ahead of Nvidia earnings
Technology stocks underperformed as investors awaited Nvidia Corp’s quarterly earnings release due later this week.
Data centre operator NextDC Ltd edged 0.2% lower to $14.55, while Megaport Ltd dropped 2.1% to $12.60.
TechnologyOne Ltd fell 2.9% to $27.80 after first-half profit missed analyst expectations due to foreign exchange headwinds.
Mining stocks mixed
Materials stocks were mixed as iron ore prices drifted towards US$107 a tonne.
- Fortescue Ltd eased 0.3% to $21.88.
- Rio Tinto Ltd slipped 0.2% to $178.66.
- BHP Group Ltd fell 0.1% to $58.70.
- James Hardie Industries plc rose 2.9% to $26.78.
Stocks in focus
- Mineral Resources Ltd gained 2.6% to $65.74 after announcing plans to restart operations at its Bald Hill lithium mine in Western Australia following an improvement in lithium prices.
- Bellevue Gold Ltd added 2% to $1.54 after mining first ore from its high-grade Deacon North area on schedule.
- Northern Minerals Ltd jumped 21.7% to 2.8 cents after backing Treasurer Jim Chalmers’ order requiring six Chinese-linked shareholders to divest their stakes over national interest concerns.
- Superloop Ltd rose 1.1% to $3.55 after announcing its employee share plan trust would acquire up to 4.5 million shares on-market.
Wall Street pressured by inflation fears
US markets fell overnight as rising inflation concerns pushed Treasury yields sharply higher.
Six of the 11 S&P 500 sectors finished lower, with materials and communication services leading declines.
Software stocks reversed early gains, with the software index ending down 1%, while semiconductor stocks rebounded to close 1.4% higher after early losses.
Micron Technology Inc rose 2.5%, while Intel Corp also gained ground as chip stocks recovered.
Healthcare outperformed, rising 1.1%.
Home Depot Inc added 0.9% after posting first-quarter earnings ahead of expectations.
Akamai Technologies Inc fell 6% after announcing a US$2.6 billion convertible bond offering.
European markets edge higher
European shares finished modestly higher as investors welcomed signs of easing tensions between the US and Iran while balancing concerns over elevated global inflation.
The pan-European FTSEurofirst 300 index rose 0.2%, while the UK FTSE 100 gained 0.1%.
Defensive sectors led gains, with food and beverage and healthcare stocks each rising more than 1.5%.
European semiconductor stocks weakened, with Infineon Technologies AG falling more than 2.5% and ASM International NV down over 1%.
Software stocks outperformed, with SAP SE rising 6% and Dassault Systèmes SE up 2.8%.
Saab AB climbed 4.4% after reports Sweden would purchase French navy frigates equipped with Saab weapons systems.
Currencies and commodities
The US dollar strengthened amid ongoing geopolitical uncertainty.
- The euro fell 0.5% to US$1.1604.
- The Japanese yen weakened 0.2% to 159.08 per US dollar.
- The Australian dollar dropped 0.9% to US71.06 cents.
Brent crude futures settled down 0.7% at US$111.28 a barrel after comments pointing to progress in Iran negotiations.
Base metals were mixed.
- Copper futures fell 1.7% on concerns higher inflation could weigh on global economic growth.
- Aluminium futures gained 0.6% after Citigroup forecast the metal could enter its strongest bull market in 50 years.
- Gold futures fell 1% to US$4,511 an ounce as the stronger US dollar pressured precious metals.
- Iron ore futures eased 0.2% to US$110.33 a tonne.
Looking ahead
In Australia, investors will watch for the release of the Westpac Leading Index for April, while James Hardie is due to report earnings.
In the United States, Federal Reserve meeting minutes are scheduled alongside earnings reports from Analog Devices, TJX, Lowe’s, Intuit, Target, Copart and Hasbro.
European markets will focus on April Consumer Price Index data.