Wall Street flounders and ASX set to drop as markets mull over inflation ‘victory’

Australian shares are set to falter as global markets ponder whether the worst rate hikes are over.

Wall Street had mixed results overnight, with the Dow Jones closing flat, the S&P500 down 0.1 per cent, and the tech-heavy Nasdaq off 0.6 per cent.

Wall Street surged the previous day when US markets rose after the world’s biggest economy released its latest inflation data.

The data showed price hikes were starting to ease, which might soften concerns about another big rate hike of up to 0.75 per cent next month.

However, San Francisco Fed president Mary Daly said it was too early to “declare victory” on inflation despite the better figures.

Ms Daly also said a 0.5 per cent rate hike in September was currently her “baseline”, and jobs and worker data that would be out soon also needed to be taken into consideration.

With Wall Street now retracting its flush of optimism, ASX 200 futures were also down in early-morning indications.

They were down 1.5 per cent by 7am AEST.

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US 10-year Treasury yields have risen slightly in an indication that markets too are still betting on rate hikes.

“Financial markets initially reacted positively to [US inflation] data that showed inflation in the US is moderating, but gains then whittled away on concerns the market may have overreacted,” ANZ noted.

“At close, the Euro Stoxx 50 had gained 0.2 per cent, the FTSE 100 dropped 0.5 per cent, while the S&P 500 and the Dow Jones were largely unchanged.

“The yield on the US 10y note jumped 11bp higher to 2.89 per cent.”