Australian shares are facing renewed pressure after hotter-than-expected US inflation revived fears of another Federal Reserve interest rate increase and triggered a technology-led sell-off on Wall Street.
US consumer prices jumped 0.6% in September, taking annual inflation to 3.7% from 3.4% in August and exceeding market expectations.
Gasoline prices surged 9.1% during the month and accounted for more than half of the headline increase, while broader underlying price pressures also remained stronger than investors had hoped.
Core inflation excluding food and energy increased 0.3% during September and 2.6% over the year.
Technology stocks lead Wall Street falls
The inflation surprise hit growth stocks particularly hard.
The Nasdaq dropped almost 1.9%, the S&P 500 lost 1.1% and the Russell 2000 fell around 1.9%, while the Dow was comparatively resilient.
ASX 200 futures were pointing to a fall of around 18 points, or 0.2%, ahead of Thursday’s Australian session.
The significance for Australian investors extends beyond the overnight equity losses.
Higher US inflation can keep Treasury yields elevated, strengthening the US dollar and raising the discount rates used to value shares globally.
Technology stocks, small caps and highly indebted businesses are particularly sensitive because more of their value depends on future earnings and affordable financing.
Australia is facing a similar inflation challenge, with the RBA having already lifted the cash rate to 4.60%.
The latest US numbers reinforce the risk that global interest rates remain elevated for longer, making another difficult session for rate-sensitive Australian assets increasingly likely.
