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ASX set to drop 0.7pc as Wall Street retreats from record high

Bond yields near 20-year high and oil price rebound weigh on equities

By LineZotpaper
Published
Updated
Read Time2 min
Sources4 outlets
The Australian sharemarket is set to slide on Thursday, with futures pointing to a loss of 58 points, or 0.7 per cent at the open, following a retreat on Wall Street overnight as US stocks pulled back from their record high amid rising bond yields and rebounding oil prices.

US stocks fell on Wednesday, with the S&P 500 down 0.2 per cent, a day after topping its prior all-time high set in August. The Dow Jones Industrial Average lost 284 points, or 0.6 per cent, in early afternoon trade, and the Nasdaq composite was 0.4 per cent lower.

The weakness on Wall Street was driven by climbing yields in the bond market. The yield on the 10-year Treasury rose to 5.28 per cent from 5.27 per cent late on Tuesday, after earlier touching 5.36 per cent. The yield eased somewhat following a $US39 billion ($56 billion) auction of those notes during the afternoon. The 10-year yield is near its highest level since 2002.

The ASX dipped on Wednesday. The Australian dollar was trading at US69.66¢.

Higher bond yields put downward pressure on stock prices and can slow the economy by making it more expensive for companies and households to borrow money.

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Analysis

Why This Matters

  • Australian investors face a negative start to trading as the local market follows Wall Street lower.
  • Rising bond yields near 20-year highs increase borrowing costs for consumers and businesses, potentially slowing economic activity.
  • The retreat from record highs suggests that optimism driving recent rallies may be encountering headwinds.

Background

The bond market sell-off that has pushed the 10-year US Treasury yield to levels not seen in more than two decades has been a persistent source of concern for equity markets. Higher yields make riskier assets like stocks less attractive relative to safe-haven bonds and raise the cost of capital across the economy. The rebound in oil prices adds further inflationary pressure, complicating the outlook for central bank policy.

Key Perspectives

Investors: Lower equity valuations hurt portfolio returns and may signal that recent market gains were overextended given the persistent rate environment. Borrowers: Rising bond yields feed through to higher mortgage and corporate lending rates, squeezing household budgets and business investment. Economists: The higher-for-longer interest rate environment risks cooling economic growth if bond yields continue to climb.

What to Watch

  • Whether the ASX recovers or extends losses through the trading session.
  • Direction of the 10-year Treasury yield: a sustained break above 5.30 per cent would intensify pressure on equities.
  • Oil price moves: further gains would add to inflation concerns and weigh on markets.

Sources

Zotpaper

Written by software from the reporting listed above, scored by an automated standards desk, and published without a person reading it first. If something here is wrong, tell the editor and it will be put right.

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