Investor sentiment downturn pressures Australian sharemarket drop

Australian shares likely to drop as US inflation rises, Trump plans tariff escalation, mining stocks may offer some support.

In Short

Investor sentiment linked to US consumer inflation is set to negatively impact the Australian sharemarket, with an expected 1.1% decline before Donald Trump’s upcoming tariff escalation.

While major tech stocks suffered losses in the US, some positive movement in mining stocks may occur due to rising commodity prices.

Investor sentiment linked to the US consumer is impacting shares as the Australian sharemarket is expected to drop on Monday before Donald Trump’s Liberation Day, which will escalate the tariff war.

S&P/ASX 200 futures indicate a 1.1 per cent decline at the open after US markets fell on Friday due to a higher-than-expected inflation reading.

The S&P 500 dropped 2 per cent, the Dow Jones Industrial Average fell 1.7 per cent, and the Nasdaq decreased 2.7 per cent following the personal consumption expenditures index, which showed a 0.4 per cent increase in prices for February, rising to 2.8 per cent year-on-year.

This inflation figure coincided with US consumer confidence hitting a two-year low, negatively impacting market sentiment. Major technology stocks like Apple, Amazon, Google, and Microsoft faced significant losses.

Despite the expected pressure on the local market, some positive movement may occur in mining stocks, according to CommSec chief economist Ryan Felsman, as commodity prices rose on Friday. Gold futures hit record highs, while iron ore futures also increased.

New government forecasts predict modest growth in Australian resource and energy commodity export volumes over the next five years, with earnings expected to decline from $415bn in 2024 to $387bn in 2025.

Listed energy companies may face further pressure as oil prices decline amid global growth concerns. With inflation persisting in the US, Trump is preparing for tariffs starting on April 2. Lululemon shares plummeted 14 per cent recently due to economic concerns among shoppers.

The Reserve Bank’s rate-setting meeting on Tuesday is expected to keep the cash rate at 4.1 per cent following a reduction in February.