Rising tensions in the Middle East are set to drag Australian equities down on Wednesday.
Chief CommSec Economist Ryan Felsman said Australian shares were set to fall by 0.2% following a disappointing lead-in on Wall Street overnight.
“We saw investors focus on the fifth day of the escalating Israel-Iran conflict and worries that the conflict will widen to include the U.S., and on the back of that, it was risk-off sentiment across the board,” Felsman said.
The S&P/ASX 200 share price index June contract last traded 16 points below the previous settlement at 8,529 points, at the time of writing.
U.S. stock indices closed lower on Tuesday (Wednesday AEST), oil prices continued to rise and U.S. interest rates fell after President Donald Trump left the Group of Seven summit early and investors awaited interest rate decisions by major central banks.
Trump intensified market worries with warnings on social media about Iran that U.S. patience was wearing thin. However, it had no immediate intention to "take out" its leader.
The Dow Jones Industrial Average dropped 0.7%, the S&P 500 lost 0.8% and the Nasdaq Composite ended 0.9% down.
Energy was the only sector in the U.S. to rise as crude oil prices rose by 4.3% due to concerns the conflict could create bottlenecks for oil exports from the oil-rich region.
Tensions drove the Australian sharemarket lower on Tuesday with the S&P/ASX 200 ending down 0.1% at 8,541.3 points.
Felsman said the Middle East was the main focus for investors without other market signals. However, financial stocks could remain weak, continuing a theme seen on Tuesday.
“Domestically there's little in the way corporate news at the moment,” he said.
In the fixed interest markets, Australian bond yields were flat at 4.236% at the 10-year end of the curve. They were down 0.09% to 3.301% on two-year paper.
