The Australian sharemarket is expected to open sharply lower after renewed US military strikes on Iran drove oil prices above US$90 a barrel, intensified inflation concerns and extended a global bond sell-off.
ASX 200 SPI contracts were down 79 points, or 0.9%, at 8,933 at about 7.15 am AEST.
Energy producers could find support from the jump in crude prices, while technology, consumer and other interest-rate-sensitive stocks are likely to face pressure from rising bond yields.
ASX finishes marginally lower
The S&P/ASX 200 slipped 9.3 points, or 0.1%, to 9,066.7 on Tuesday, while the All Ordinaries declined 0.1% to 9,260.9.
Energy gained 1.2% and materials added 0.9%, offsetting weakness across consumer and technology stocks. Consumer discretionary fell 1.8%, while the All Technology Index lost 1.4%.
Australia’s 10-year government bond yield reached 5.15%, its highest level since July 2011, adding to pressure on rate-sensitive companies. The local market recovered from an intraday fall of 0.6% to close almost flat.
Wall Street falls for third session
US stocks declined for a third consecutive session as escalating conflict with Iran pushed energy prices higher and raised fears that inflation will remain elevated.
The S&P 500 fell 54.67 points, or 0.7%, to 7,631.47, while the Dow Jones Industrial Average dropped 419.02 points, or 0.8%, to 52,766.88. The Nasdaq Composite lost 271.11 points, or 1%, to finish at 26,099.77.
Technology stocks were among the biggest weights on the market. Nvidia fell 1.5%, Amazon dropped 1.9% and Advanced Micro Devices declined 2.4%.
The sell-off extended into US government bonds. The benchmark 10-year Treasury yield increased to 4.79% from 4.75%, while the two-year yield rose to 4.39% from 4.34%.
Higher yields increase borrowing costs and reduce the relative appeal of equities, particularly highly valued technology and growth stocks. Wall Street is also weighing the possibility of another Federal Reserve rate increase as energy costs feed into inflation.
Asian markets mixed
Asian markets produced a mixed performance before the latest Wall Street decline.
Japan’s Nikkei 225 slipped 0.2% to 66,215.34 and the Shanghai Composite eased 0.2% to 3,979.89. Hong Kong’s Hang Seng lost 0.9% to 25,329.73, while Japan’s broader TOPIX gained 0.6%.
European stocks retreat
European equities also finished mostly lower as oil prices and government bond yields climbed.
The FTSE 100 fell 0.3% to 10,789.28, although energy heavyweight BP surged more than 5%. Germany’s DAX dropped 1.2% and France’s CAC 40 declined 0.4%.
The global bond rout pushed the UK 30-year gilt yield to its highest level since 1998, while Germany’s equivalent yield reached a 15-year high. European markets were pressured by expectations that central banks may need to tighten monetary policy further.
Currencies and commodities
The Australian dollar was trading near US71.43 cents.
Bitcoin was trading at about US$77,268, down 1.6% over 24 hours, after ranging between US$76,483 and US$79,166.
Brent crude surged 4.6% to settle at US$94.65 a barrel, while West Texas Intermediate gained 5.2% to US$90.22 — its first close above US$90 in more than a month.
Oil prices climbed after further US strikes on Iran, with the conflict severely disrupting traffic through the Strait of Hormuz, a route that normally carries about 20% of global oil shipments.
Iron ore added 3.4% to US$96.05 a tonne, potentially providing some support for Australian miners.
Precious and base metals moved in the opposite direction. Gold continued its downward trend - 2.3% to US$4,432.80 an ounce, silver fell 3.9% and copper declined 2.5%. Aluminium, lead, tin and zinc finished higher, while nickel eased 0.1%.
What's coming?
Australian June-quarter GDP figures, due at 11.30 am AEST, will be the main domestic economic event watched by investors today.