A 0.1 per cent rise in headline US inflation may not register as significant to most - but it cost Australian investors $63 billion in just ten minutes on Wednesday.

Not since the early days of the pandemic has the Australian sharemarket registered a fall of this magnitude - 2.7 per cent.

Before the opening trading bell sounded on the ASX, investors had already braced for a bloodbath. Our sharemarket, like most around the world, slavishly follows the direction set by the US markets - and the US performance on Tuesday night (our time) was a horror show.

The US inflation number, which economists and investors had expected to continue its recent trajectory of inching down, took a contrarian course overnight. And in doing so, it served as a reminder to investors that the cautious optimism enjoyed by the markets can easily turn on a dime.

The investors counting on the US Federal Reserve Bank to ease back on its rapid-fire interest rate hikes will now need to adjust their expectations and question whether these hikes have gained sufficient traction towards taming inflation.

The US Dow Jones index fell by almost 4 per cent and the tech-heavy Nasdaq plunged by more than 5 per cent.

Such a violent market response is often followed by a small reversal in the following day’s session. But not always. (US futures trading on Wednesday afternoon were marginally up. But this portent can be unreliable.)

Sharemarkets, particularly during uncertain times, have a tendency to over swing in either direction. That’s because they are largely driven by sentiment - fear and greed mixed, at times, with a lashing of FOMO.

But in Australia investors have been somewhat cushioned from the worst excesses of this year’s global sharemarket rout -primarily because of the weighting of oil, gas and mining stocks on our bourse.