Shares will hand back some of their previous day gains when trading resumes on the Australian Securities Exchange (ASX) on Wednesday as they follow the lead of United States stocks, which fell as inflation worries drove up bond yields.
This is the outlook for the market opening at 10 am AEST (12 am GMT) based on trading in the June contract of the ASX 200 index, which was priced 36 points or 0.42% below the prior settlement at 8,603 points at the time of writing.
The major indexes in New York ended down on Tuesday (Wednesday AEST) as the benchmark 30-year Treasury yield reached its highest level in almost two decades.
The 10-year yield rose to its highest level in more than a year as elevated oil prices and the lack of progress with peace talks between the U.S. and Iran raised inflation worries.
The Dow Jones Industrial Average fell 0.7%, the S&P 500 fell 0.7%, and the Nasdaq Composite shed 0.8%.
"There's nothing constructive that's leading us to believe there's going to be a ceasefire with any sort of substance,” Rosenblatt Securities managing director and equity sales trader Michael James was quoted by Reuters as saying in this article.
“As long as there is nothing happening along those fronts, oil is remaining high, bond yields are remaining high, and the market's anxiety levels are getting increasingly elevated.”
CommSec Equity Market Strategist James Gruber said U.S. bond yields had been rising for more than a month, but markets were only starting to take notice now.
“Stocks are going down at the moment and that's sort of offsetting optimism around AI (artificial intelligence),” Gruber said.
The Australian market had bounced back on Tuesday from seven-week lows after U.S. President Donald Trump delayed military strikes on Iran, allowing the ASX 200 index to finish 1.2% higher at 8,604.7 points.
Corporate news on Wednesday includes results from James Hardie Industries (ASX: JHX).
In fixed interest markets, Australian Government bond yields dropped as two-year rates eased by 0.7% to 4.718% and 10-year rates dropped by 0.3% to 5.091% at the time of writing.
