Aussie shares are predicted to drop sharply this morning, with futures indicating a 1.6% wipeout.
The drag can be attributed to some across-the-board losses on Wall Street overnight and more particularly, a steep drop in gold and iron ore prices, which is likely to pressure local mining stocks.
Tech stocks drag Nasdaq
Things don’t look good for the recently bullish technology sector either, with the tech-heavy Nasdaq tumbling 3.6% in overnight trade.
Wall Street ended its session with significant losses across all major indices.
The Dow Jones fell 1,123 points or 2.6% to close at 42,327 points, marking its tenth consecutive losing session – its worst losing streak since 1974.
Rate-sensitive consumer discretionary and real estate stocks led losses, with Broadcom (NASDAQ:AVGO) sliding 6.9%.
The S&P 500 dropped 3% to 5,872 points, while the Nasdaq, as mentioned, shed 3.6%, closing at 19,393 points.
The Nasdaq’s poor fortunes were led by some heavy losses among the tech megacaps, with Apple (NASDAQ:AAPL) slipping 2.1%, Microsoft (NASDAQ:MSFT) shedding 3.8% and Nvidia losing 1.1%.
Tesla (NASDAQ:TSLA) bore the brunt of the sell-off, tumbling 8.3% in a single session.
Despite the day's losses, the Nasdaq remains up 29% year-to-date, thanks to its otherwise strong performance over a turbulent year.
Tesla itself will no doubt withstand the big session loss given its broader 78% gain over 2024, which speaks to the resilience of the sector at the moment.
Analysts sheet a lot of this confidence home to Elon Musk's strategic campaigning for and positioning with next president Donald Trump during the year, which has given his company that winning glow.
Fed cuts rates but outlook updated
The broader sell-off on Wall Street was largely driven by the Federal Reserve's updated economic outlook.
The Fed made the call to lower its benchmark policy rate by 25 basis points to a target range of 4.25%–4.50%.
While the rate cut met expectations, the Federal Open Market Committee's (FOMC) updated economic projections suggested a slower pace of cuts in 2025, with only two expected reductions versus the four previously forecast.
The FOMC also projected a year-end 2025 rate range of 3.75%–4.0%, citing a resilient US labour market and persistent inflation challenges.
The Fed’s announcement caused a sharp pivot in US markets.
While indices remained relatively stable earlier in the day, stocks took a sharp dive during Federal Reserve Chair Jerome Powell's press conference, during which he shared the banks updated expectation of slower rate cuts.
High-risk assets such as equities became less attractive as the prospect of higher returns on low-risk investments, such as bank deposits, strengthened the US dollar.
The market's negativity was sector-agnostic, with 481 out of the S&P 500's 500 stocks declining.
Mining and technology stocks are expected to replicate these declines on the ASX today.
European sharemarkets bucked the trend, inching up 0.1% as technology stocks gained 1.1%.
Renault (EPA:RENA) surged 5.2% on reports of potential tie-ups between Honda (NYSE:HMC) and Nissan.
Meanwhile, British inflation rose to 2.6% year-on-year in November, as expected.
US bond yields climbed following the Federal Reserve's policy update, with the 10-year Treasury yield up 12 basis points to 4.50%.
Currencies and commodities
Currency markets weakened against the US dollar, with the euro falling to US$1.0365, the Australian dollar settling at 62.25 US cents, and the Japanese yen easing to JPY154.65 per US dollar.
In commodities, oil prices edged higher as US crude inventories fell. Brent crude gained 20 US cents to US$73.39 a barrel, while Nymex crude rose 50 US cents to US$70.58 a barrel.
Gold slipped 0.3% to US$2,653.30 an ounce, weighed down by rising Treasury yields and a stronger US dollar.
Iron ore futures dropped 85 US cents to US$104.73 a tonne due to easing supply concerns and furnace maintenance in China.
Looking ahead, Australian wealth data is due and AGMs for ANZ, Elders and Incitec Pivot are imminent.
Central banks in Japan, the UK, Sweden and Norway are set to announce interest rate decisions, while the US will release data on GDP, housing and jobless claims.