ASX to dip as global markets slide on US CPI outlook, Ukraine war and China lockdowns

Australian shares are expected to start the day lower after global equity markets fell, pulled lower by technology shares in Europe and on Wall Street.

ASX futures were down 27 points or 0.4 per cent to 7,435 by 6:58am AEST.

The Australian dollar was down at 74.16 US cents this morning.

Rate-sensitive growth stocks lead decline

Wall Street closed sharply lower on Monday as investors started the holiday-shortened week in a risk-off mood, with rising bond yields weighing on market-leading growth stocks ahead of crucial inflation data.

All three major US stock indexes ended deep in negative territory, with tech and tech-adjacent stocks pulling the Nasdaq down 2.2 per cent.

“There’s been two kinds of sell-offs in the past month or two,” said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia.

“There’s the rising yields, which primarily affects tech and other growth stocks, and then there’s the recession/economic slowdown sell-off that affects energy and various materials’ names.

“Today, you’re seeing both.”

The Dow Jones Industrial Average fell 413.04 points, or 1.19 per cent, to 34,308.08, the S&P 500 lost 75.75 points, or 1.69 per cent, to 4,412.53 and the Nasdaq Composite dropped 299.04 points, or 2.18 per cent, to 13,411.96.

US yields hit three-year highs

The benchmark 10-year US Treasury yield hovered near a three-year high ahead of key inflation data expected on Tuesday.

The US Federal Reserve has vowed to aggressively tackle scorching inflation, and market participants largely expect a series of 50-basis-point interest rate hikes from the central bank in the coming months.

The Labor Department’s CPI report is expected on Tuesday for any sign the inflation wave has crested.

Analysts expect the report will show an 8.5 per cent year-on-year growth in consumer prices, the hottest reading since 1981.

Impact from Ukraine and China

Ongoing geopolitical strife also helped prompt the flight to safety.

Ukraine said it expected Russia to launch a huge new offensive soon as the most serious conflict in Europe since the Balkan wars of the 1990s wore on, despite ongoing peace negotiations.

All 11 major sectors in the S&P 500 ended the session in the red, with energy suffering shares the biggest percentage losses.

MSCI’s gauge of stocks across the globe closed down 1.33 per cent and the pan-European STOXX 600 index slide 0.59 per cent as regional Bourses fell with the exception of France’s CAC 40.

Oil prices dropped by about $US4 a barrel, with Brent tumbling below $US100 on plans to release record volumes of crude from strategic reserves and on continuing COVID-19 lockdowns in China.

Brent crude oil was trading at $US98.97 a barrel by 07:00am AEST.



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