US stocks fell on Tuesday as higher oil prices and rising global bond yields increased concerns that persistent inflation could force the Federal Reserve to raise interest rates this month.
The Dow Jones Industrial Average dropped 419.02 points, or 0.79%, to 52,766.88. The S&P 500 fell 0.71% to 7,631.47, while the Nasdaq Composite declined 1.03% to 26,099.77.
Markets increased their expectations for a September rate rise, with fed funds futures putting the probability of a 25-basis-point increase at 68%, up from 39.6% a week ago.
Global bond yields climbed, with the US 10-year Treasury yield rising around five basis points to 4.80%. Japan’s 10-year yield reached its highest level since 1996, while Germany’s benchmark yield climbed to its highest since 2011.
Oil prices also surged as the Iran war escalated, with WTI rising 5.2% to US$90.22 a barrel and Brent gaining 4.6% to US$94.65.
Australian Market Outlook
Australian shares are set for a weaker open, with S&P/ASX 200 futures down 79 points, or 0.9%, to 8,933.
Locally, attention turns to second-quarter GDP figures due at 11.30am AEST. UBS expects the economy to have expanded 0.4% over the quarter and 1.9% from a year earlier, broadly in line with the Reserve Bank’s August forecasts.
UBS expects the RBA to raise the cash rate by another 25 basis points to 4.60% by November, although it sees a growing risk of an earlier increase in September.
The Reserve Bank of New Zealand will announce its policy decision at midday AEST, with a 25-basis-point increase widely expected, while the Bank of Canada meets later in the day.
