ASX futures signalled a weaker start on Wednesday after US inflation surprised on the upside and knocked Wall Street lower, with contracts at 4.56am AEDT pointing to a fall of 61 points or 0.7% at the open.
US markets lost ground after the consumer price report showed inflation rose more than economists expected: the S&P 500 fell 0.8%, the Dow was down 291 points or 0.6%, and the Nasdaq slid 1.3%.
The local currency was softer, trading at about US68.54¢, after the ASX surged 1.1% on Tuesday, a move futures suggested would be pared back at Wednesday’s open.
Traders interpreted the inflation read as further reason the Federal Reserve may need to lift interest rates again in December and possibly thereafter. An underlying measure of prices that Fed officials monitor increased by 0.3% from September, matching the threshold warned about by one governor.
“a stronger policy move may be needed” and moving by only the usual amount could “put our credibility at risk, a risk I am not eager to take.”
The report drove a jump in bond yields: the 10-year US Treasury yield rose to 5.02% from 4.88% late on Monday, a sizeable move that influences mortgage and business borrowing costs.
Oil slipped despite the market disturbance, with Brent crude down 0.7% to $US91.91 a barrel, after comments by President Donald Trump that the war in Iran “militarily is effectively over”.
Higher yields hit rate-sensitive parts of the stockmarket. US homebuilders fell sharply, Lennar slid 4.8%, D.R. Horton dropped 3.9%, PulteGroup gave up 3.8%, and Builders FirstSource fell 3.8%, as rising mortgage costs threaten buyer demand.
Large-cap technology and artificial-intelligence related names also sold off. Nvidia, the single biggest weight on the S&P 500, fell 6.3% after its board opened an investigation following CEO Jensen Huang’s admission of a relationship with a woman who, according to reports, US intelligence said was gathering information for China. GE Vernova lost 6.2%, Micron Technology fell 3.7%, CoreWeave slid 2.2%, while Advanced Micro Devices was largely unchanged.
Despite the global jitters, some overseas markets advanced: South Korea’s Kospi jumped 4.4% on strong gains for Samsung Electronics and SK Hynix, and most European and Asian indexes were higher, even as investors reassessed the impact of higher yields and renewed scrutiny of AI data centre development.
Anthropic, the AI company behind the Claude chatbot, said in a US filing it plans to seek a valuation of roughly $US1.4 trillion ($2 trillion) in an eventual stock sale, which would place it among the largest companies by market value if achieved.
