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Highlights:
- The ASX 200 futures point to a 0.12% decline, influenced by weak US markets and soaring Treasury yields.
- US indices, including the S&P 500 and Nasdaq, fell significantly as bond yields climbed to nine-month highs.
- Australian inflation data set for release, with markets anticipating a slight uptick in the monthly CPI indicator.
The ASX 200 futures suggest a softer opening, with a 10-point drop, reflecting overnight weakness in US markets. Rising Treasury yields have weighed heavily on global equities, especially technology stocks, which were among the biggest decliners. The Australian market also awaits critical inflation data, which could shape expectations for future interest rate movements.
US Market Overview: Technology Sell-Off and Rising Yields
Major US indices closed lower, led by declines in technology stocks. The S&P 500 dropped by 1.11%, while the Nasdaq experienced a sharper decline of 1.79%. The Dow Jones Industrial Average fell 0.42%, and the Russell 2000 shed 0.72%.
The surge in the US 10-year Treasury yield, which climbed to 4.68%, marked its highest level since April. This yield has risen by 110 basis points over the past year, reflecting heightened concerns over inflation and longer-term economic uncertainties. The steepening Treasury yield curve, which has seen six weeks of consistent rises, indicates sustained worries about inflationary pressures.
The spread between the S&P 500's forward earnings yield and the 10-year Treasury yield reached a 23-year low, signaling challenges for equity markets in the absence of falling bond yields. Technology stocks, which are particularly sensitive to higher yields, were among the hardest hit. Notable movers included Nvidia, down 6.2%, Tesla, which fell 4%, and Amazon, declining 2.4%.
Commodities and Global Market Trends
Oil prices ticked higher overnight, driven by escalating tensions in the Middle East. This backdrop provided modest support to energy stocks. However, other commodities, including nickel, uranium, and copper, faced continued downward pressure.
Iron ore stocks remained under pressure despite stable prices, with Fortescue Metals Group Limited (ASX:FMG) declining 4.4% to reach a four-month low. Iron ore was last trading at US$97.7 per tonne, up 0.15% overnight.
Australian Market Focus: Inflation Data in the Spotlight
The ASX 200 is expected to break its four-day winning streak as rising yields and a subdued global market weigh on sentiment. Australian inflation data, due for release at 10:30 am AEDT, will be a key focus. Markets expect the monthly CPI indicator to edge up to 2.2% for November, compared to 2.1% in October.
Sectors sensitive to rising yields, such as technology, are likely to face selling pressure. Technology stocks had been among the top performers on Tuesday, rising 1.46%, but are now poised for a reversal. Meanwhile, energy stocks may find some support amid geopolitical concerns and firmer oil prices.
Outlook for the ASX 200
The ASX 200 faces headwinds as it contends with weaker sentiment from global markets and the impact of rising bond yields. Inflation data will be closely monitored for any indications that could influence monetary policy decisions. Growth-sensitive sectors may remain volatile, while commodities and energy stocks could find selective support based on global developments.
