The ASX will follow a weak session from Wall Street, which saw the S&P 500 dropping 0.8% (the third day in a row that the benchmark US stock index has fallen).
And it’s not because of the latest headlines on oil prices and the US-Israeli war against Iran this time.
On that note, Donald Trump told reporters the US might have to give Iran “another big hit” if it doesn’t agree on a peace deal — and that he had been an hour away from ordering an attack before postponing it.
Those mixed signals from the US president led to the price of Brent crude futures falling 1.1% to $US100.84 per barrel, which is still very high.
US bond sell-off
What appears to have spooked the share market is a bond sell-off (of all things), which has pushed government bond yields higher.
Basically, the yield is the return that investors expect from lending money to the US government.
When a government wants to raise extra funds, it issues new debt — in the form of bonds (which are kind of like an ‘IOU’).
The price of a bond and its yield (return) move in opposite directions. (ie. when people sell their bonds, the interest rate goes up)
Overnight, the US 30-year Treasury yield jumped as high as 5.2%, its highest level in 19 years, while the 10-year yield rose to 4.69%, its highest since January 2025.
The 10-year yield, in particular, is used to gauge mortgage, car loans and credit card interest rates for consumers (ie, they’re heading higher).
It seems US investors are now worried the war against Iran (and oil shock) will drive up inflation, which will probably curb inflation and put a dent in corporate profits, raising questions about the sky-high valuations of some key stocks (in particular, the high-flying tech giants investing heavily in AI).