The Australian sharemarket is set for a slow start on Wednesday morning after falls on Wall Street overnight, with US stocks dropping despite upbeat news on the country’s economy and employment.
ASX 200 futures were 0.1 per cent lower at 8.30am, with a fall of 10 points to 8259 expected. The local bourse finished 0.3 per cent higher on Tuesday, its fourth consecutive session of gains.
The Australian sharemarket is set for a slow start on Wednesday morning after falls on Wall Street overnight.Credit: Wayne Taylor
In the US, the S&P 500 fell 1.1 per cent after giving up an early gain. The Dow Jones Industrial Average dropped 178 points, or 0.4 per cent, while the Nasdaq composite tumbled 1.9 per cent.
Stocks dropped under the weight of rising yields in the bond market, which jumped immediately after the release of two encouraging reports on the economy. One said US employers were advertising more job openings at the end of November than economists expected. The other said activity for finance, retail and other services businesses grew much faster in December than expected.
The strong reports are, of course, good news for workers looking for jobs and for anyone worried about a possible recession that earlier seemed inevitable to pessimists. But such a solid economy could also keep up pressure on inflation, and it could make the Federal Reserve less likely to deliver the cuts to interest rates that Wall Street loves.
Expectations for fewer cuts to interest rates in 2025 had already been building for weeks, which sent longer-term Treasury yields upward. So have worries about other possible Trump policies, such as tax cuts, which could swell the US government’s debt and likewise push yields higher.
Those higher yields make Treasury bonds more attractive to investors who might otherwise buy stocks, which in turn puts downward pressure on stock prices, and the super-safe bonds are paying notably more. The yield on a 10-year Treasury climbed to 4.69 per cent from 4.63 per cent shortly before the release of Tuesday’s reports and from just 4.15 per cent in early December.
High yields can put heavy pressure on stocks seen as the most expensive, which pulls the lens toward Nvidia and other Big Tech stocks that have soared in the frenzy around artificial-intelligence technology.
Nvidia had been on track to set another all-time high in morning trading, after chief executive Jensen Huang unveiled a suite of new products and partnerships the night before. He talked up the potential for AI technology in robotics, among other opportunities for big growth.
