Investing.com - The Australian share market is bracing for a drop on Thursday as traders recalibrate their expectations for interest rate cuts following a third consecutive month of unexpectedly high inflation in the United States.
In response to the surprising inflation data, major stock indexes on Wall Street experienced a downturn, while yields on US Treasury 10-year bonds escalated by 19 basis points, surpassing the 4.5% threshold. Concurrently, yields on Australian 10-year government bonds increased by 15 basis points, reaching 4.26%.
The US dollar experienced its most significant surge since January, as market expectations for rate cuts were dialed back. In contrast, the Australian dollar fell by 1.75%, trading at US65.2¢ post-inflation data. The US dollar also purchased ¥153, sparking rumors that the Bank of Japan might intervene to protect its currency in the upcoming Thursday trading session.
The minutes from the Federal Reserve's policy meeting in March revealed apprehensions that inflation might not be reaching its 2% target as expected, suggesting that a tighter monetary policy may need to be sustained longer than initially anticipated.
In a counterintuitive move, oil prices bounced back from earlier losses and started climbing after reports suggested that the US and its allies are expecting imminent major missile or drone attacks by Iran or its affiliates on military and government targets in Israel.
On the local front, traders are awaiting the release of Chinese inflation data later in the morning, which will provide insights into the current state of the world's second-largest economy.
Market Highlights:
- ASX futures experienced a drop of 63 points or 0.8% to 7830 as of 6.40am AEST.
- The Australian dollar declined by 1.8% to 65.12US cents.
- Bitcoin saw an increase of 1.1%, trading at $US69,813 at 6.54am AEST.
- In New York, BHP (ASX:BHP) fell by 1.4%, Rio by 1.1%, while Atlassian rose by 0.9%.
- Tech giants like Tesla (NASDAQ:TSLA) and Apple (NASDAQ:AAPL) saw a drop by 2.9% and 1.1% respectively, while Nvidia increased by 2.0%.
- Spot gold dipped by 0.9% to $US2331.47/oz as of 4.14pm in New York.
- Brent crude rose by 1.3% to $US90.57 a barrel.
- Iron ore prices fell by 0.8% to $US106.60 a tonne.
- 10-year yield in the US, Australia, and Germany stood at 4.54%, 4.12%, and 2.43% respectively.