Australian shares are set to slip alongside Wall Street after a sharp jump in oil prices reignited inflation worries as new data showed US prices rose the fastest since 1981.

ASX futures were down 7 points or 0.1% at 7417 as of 8.00am on Wednesday, suggesting a negative start to the day. Overnight, the S&P 500 declined 0.3% after rising as much as 1.3% earlier in the session. The Dow Jones Industrial Average slid 0.3%. The technology-heavy Nasdaq Composite fell 0.3%.

Wall Street notched gains earlier in the day after price data released before the bell hinted inflation could be peaking. Consumer prices roses 8.5% in March compared to a year earlier, outpacing February’s 7.9% reading in part due to a big jump in gasoline prices. However, the “core” measure, which strips out volatile items, rose 0.3% compared to a month earlier, lower than economist’s expectations and below the 0.5% notched in February.

"Those numbers, as you will remember, were so high," said Gargi Chaudhuri, the head of iShares Investment Strategy Americas at asset manager BlackRock. "Inflation data is now indicating, perhaps, that we're at peak or near peak."

Bonds rallied in response as investors bet fewer interest rate hikes will be required to curb inflation. Yields on US 10-Year Treasury Notes fell to 2.72% from 2.78% a day earlier. Shorter duration bonds also rose, with the yield on 2 year Treasury Notes slipping to 2.495%. Yields fall when prices rises.

Gains evaporated by the closing bell as crude oil prices spiked, raising fears soaring energy could keep inflation high. Brent crude rallied above US$100, rising 6.3% to US$104.64.

Separately, Russian President Vladimir Putin declared peace talks with Ukraine were “at dead end” in public comments overnight as he vowed to continue the invasion.

Locally, S&P/ASX 200 closed 0.4% lower at 7454.0 after a volatile trading day ended with all sectors in the red.

Health care stocks were pummelled, losing 1.4%, while technology stocks continued to drag on the benchmark, falling 0.9%. Imugene was the day's poorest performer, finishing 8.7% lower, while ResMed and CSL lost 3.4% and 1.3%, respectively.

Buy-now-pay-later stock Zip retreated 5.7%, while Appen fell 3.1%. Still, Iress gained 1.7% after announcing it was ceasing the divestment of its U.K. mortgage business.

Pendal fell 0.2% after saying it would reject Perpetual's takeover offer, with Perpetual also falling 0.4%.

City Chic was another poor performer, finishing the day 7.9% lower.

In commodity markets, iron ore rose 2.8% to US154.85 per tonne; gold futures declined 0.3% to $1,970.60.

In local bond markets, the yield on the Australian 10-year bond rose to 3.07%.

The Australian dollar was buying 74.51 US cents as of 8.00am, unchanged from the previous close of 74.51. The WSJ Dollar Index, which measures the US dollar against 16 other currencies, rose to 92.58, the highest level since May 2020.


Chinese stocks ended higher amid signs the country is relaxing some Covid-19 restrictions in Shanghai, Oanda analyst Jeffrey Halley said in a note. "In Shanghai, restrictions have been loosened for about half the population. If an apartment complex has had no cases for two weeks, residents can start moving around," and the resulting positive sentiment is driving shares up, Halley said. Consumer stocks including liquor makers closed higher. Index heavyweight Kweichow Moutai rose 3.6%, Wuliangye Yibin gained 6.6% and Luzhou Laojiao was 7.2% higher. The Shanghai Composite Index rose 1.5% to 3213.33, the Shenzhen Composite Index climbed 1.8% to 2047.88 and the ChiNext Price Index gained 2.5% to 2523.69.

Hong Kong's Hang Seng Index rises 0.3% to 21279.18, buoyed by tech stocks. The index could trade higher today after the Chinese securities regulator pledged to commit to measures to widen access to capital markets, analysts from KGI Securities say. Chinese regulators have also approved the first batch of monetized online games since July, signalling that regulatory controls over the internet sector could be easing, KGI adds. Leading the gains is NetEase, which rises 4.5%, and, up 2.9%. Alibaba Health Information Technology gains 2.2%. The Hang Seng Tech Index is 1.3% higher at 4246.92. Decliners include Wuxi Biologics, off 1.3%.

Japanese stocks ended lower, dragged by declines in shipping and machinery stocks, as concerns persisted over supply-chain disruptions and slower trade. Major shipper Mitsui O.S.K. Lines shed 6.1% and industrial-robot maker Fanuc dropped 5.5%. The Nikkei Stock Average fell 1.8% to 26334.98. Investors remain focused on the war in Ukraine, Covid-19 lockdowns in Shanghai and their implications to global trade.


European markets fell as banks retreated, even as Wall Street traded higher early in its session. The pan-European Stoxx Europe 600, French CAC 40 dropped 0.4%, and the German DAX fell 0.5%.

European banks fell on reports that US investor Capital Group had sold stakes in Germany's Deutsche Bank and Commerzbank.

"US markets opened modestly higher in early trade after the latest US CPI numbers raised the hope that the surge in price pressures we've seen in the last six months might be starting to show signs of topping out," CMC's Michael Hewson says.

In London, the FTSE 100 closed down 0.5% on Tuesday on a mixed day for some of London's top listed companies, with Rolls-Royce as the worst performer and BP and Shell ending higher following a rebound in crude oil prices.

Rolls-Royce received was downgraded by JPMorgan as the profitability of its new-markets unit--which houses the new modular nuclear reactor production--came into question, CMC Markets UK says.

ASOS, meanwhile, had an up-and-down day, with shares initially falling after it reported a swing to a first-half pretax loss and a rise in costs, before climbing to finish up 4.8%.
Crude prices recovered from three-week lows Monday amid supply-demand worries, with BP ending up 2.4% and Shell finishing up 1.4%.

North America

US stocks slipped, giving up early gains, as investors pondered how the Federal Reserve will act to tame inflation, which Tuesday's data showed rising in March at the fastest annual pace in four decades.

The S&P 500 declined 0.3% after rising as much as 1.3% earlier in the session. The Dow Jones Industrial Average slid 0.3%. The technology-heavy Nasdaq Composite fell 0.3%.

Stocks started the day solidly in the green, but by midafternoon, those gains had evaporated.

"The market continues to be only and uniquely focused on inflation," said Alessio de Longis, a portfolio manager at Invesco. "It's quite telling when individual components of a CPI [consumer-price index] report are able to drive so much of the day-to-day price movements."

The Labor Department reported ahead of the opening bell that the consumer-price index rose 8.5% in March from a year before. That outpaced February's 7.9% reading and was higher than some economists had forecast.

Some investors, though, were relieved to see little in the inflation report suggesting that price rises will accelerate further in the near future. They reasoned that the annual inflation rate could cool off as it starts reflecting comparisons with the middle of 2021, when rising prices first became a serious economic concern.

"Those numbers, as you will remember, were so high," said Gargi Chaudhuri, the head of iShares Investment Strategy Americas at asset manager BlackRock. "Inflation data is now indicating, perhaps, that we're at peak or near peak."

Even so, Fed governor Lael Brainard, who is awaiting Senate confirmation to serve as the central bank's vice chairwoman, reiterated Tuesday the Fed's readiness to take an aggressive stance against inflation.

"Inflation is too high," Ms. Brainard said in remarks at a Wall Street Journal summit. "Getting inflation down is going to be our most important task."

A large portion of March's inflation was driven by energy prices, which climbed 11% from a month earlier. Many investors and economists prefer an alternate gauge, known as core inflation, that strips out volatile food and energy costs. That metric rose 0.3% in March month over month, below economists' expectations and down from 0.5% in February.

Money managers expect the readings will factor heavily into the Fed's rate-rise decision at its May meeting, and many anticipate the central bank might increase rates by half a percentage point. Federal-funds futures -- derivatives used to bet on the path of interest rates -- show a nearly 90% probability of such a rate rise, up from about 78% last week, according to CME Group.

"The main debate in the markets at the moment is price inflation and growth deflation," said Huw Roberts, head of analytics at Quant Insight. "At what point does the inflation spike cause the Fed to hike so aggressively...that we tip into a growth deflationary environment?"

Investors bought up government bonds on Tuesday, pushing down yields, which fall when bond prices rise. The yield on the benchmark 10-year Treasury note fell to 2.724%, from 2.779% at Monday's settlement.

As they digest inflation data, traders are also anxious to get a glimpse at how corporate profits are faring amid rising prices. Later this week, Delta Air Lines, Bed Bath & Beyond and a handful of big investment banks and financial firms will be among the first public companies to report their results for the first stretch of 2022.

"So far, we haven't seen any meaningful demand destruction" from rising prices, said Amanda Agati, chief investment officer at PNC Asset Management. "I think what will be very telling -- and we're right on the eve of first-quarter earnings season -- is what will happen with profitability and margins."

The answer could help set the path for a fragile stock market, which has been battered this year by investor anxieties around the war in Ukraine and central-bank policy. Strict Covid-19 lockdowns in Shanghai have added to traders' worries lately, with data showing that China's restrictions are beginning to weigh on its economy.

Meanwhile, Brent crude, the international oil benchmark, rose 6.3% to $104.64 a barrel, regaining ground after losses on Monday. Lockdowns in China and planned releases from strategic reserves in the US and elsewhere have pressured oil prices downward recently. The Biden administration plans to temporarily allow high-ethanol content gasoline to be sold this summer, an attempt to ease prices at the pump.

Shares of energy companies rose alongside oil prices. The S&P 500's energy sector was its best-performing group, rising 1.7%.