Tech companies (down 0.6 per cent) were another weight on the index. Accounting software firm Xero (down 1.9 per cent) and data centre operator NEXTDC (down 1.5 per cent) were among the biggest mega-cap losers. Critical minerals miner IGO (down 3.3 per cent) was the weakest large-cap, followed by Seven West Holdings (down 2.4 per cent) and construction materials company Boral (down 2.1 per cent).

The lowdown

Capital.com senior financial market analyst Kyle Rodda said the Australian sharemarket dipped in early trade as bond yields increased across the curve.

“This move follows what happened on Wall Street, with the modest rise in long-term rates putting a slight squeeze on valuations,” he said.

Rodda said investors would be eyeing US inflation data on Wednesday. Apart from the federal budget, Australia’s wage price index and jobs data are also out later this week.

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US stocks coasted to the close of another winning week on Friday.

The S&P 500 rose 0.2 per cent to finish a third straight winning week following its mostly miserable April. It had been on pace for a bigger gain in the morning, but that mostly disappeared following a discouraging report on US consumer sentiment.

The Dow Jones gained 0.3 per cent and the Nasdaq composite edged down by less than 0.1 per cent.

The S&P 500 has climbed back within 0.6 per cent of its record on revived hopes that the Federal Reserve may deliver cuts to interest rates this year. A flood of stronger than expected reports on profits from big US companies has also helped support the market.

In the bond market, Treasury yields rose following the discouraging preliminary report from the University of Michigan.

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It suggested sentiment among US consumers is weakening by much more than economists expected, and that the drop was large enough to be “statistically significant and brings sentiment to its lowest reading in about six months”, according to Joanne Hsu, director of the survey of consumers.

Potentially even more discouraging is that US consumers were forecasting inflation of 3.5 per cent in the upcoming year, up from their forecast of 3.2 per cent a month earlier. If such expectations spiral higher, the fear is that it could lead to a vicious cycle that worsens inflation.

It highlights how some companies have recently been describing increasing struggles among their customers, particularly their lower-income ones.

The yield on the 10-year Treasury rose to 4.50 per cent from 4.46 per cent late Thursday. But the movement was still relatively modest compared with its drop from 4.70 per cent late last month.

Markets may remain on hold until Wednesday’s highly anticipated update on US inflation at the consumer level, according to rates strategists at Bank of America. Traders are still largely penciling in one or two cuts to interest rates by the US Federal Reserve this year, according to data from CME Group.

“Right now, the market is in a good mood thanks to a decent earnings season and a Fed that has a high bar to hiking,” according to Brian Jacobsen, chief economist at Annex Wealth Management. “That mood can change quickly.”

Last week, Federal Reserve chair Jerome Powell helped pull yields lower after saying the central bank remained closer to cutting its main interest rate than hiking it, despite a string of stubbornly high readings on inflation this year. The Fed has been keeping its main interest rate at the highest level in more than two decades in hopes of getting high inflation fully under control.

A cooler than expected jobs report at the end of last week, meanwhile, suggested the US economy could pull off the tricky balancing act of staying solid enough to avoid a bad recession but not so strong that it worsens inflation.

In stock markets abroad, London’s FTSE 100 rose 0.6 per cent after the government reported the British economy had bounced back to growth at the start of the year. The performance was better than expected, and it snapped two straight quarters where the economy shrank.

In Japan, Tokyo’s Nikkei 225 rose 0.4 per cent after a report showed strong auto exports had whittled down the nation’s trade deficit and it had racked up solid returns on overseas investments.

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“At his core, he’s a numbers man, a beancounter,” said a rival telco executive as Optus primes for a reboot in November. New chief executive Stephen Rue is set to move the company on from various crises ahead of what industry insiders say could be a renewed push towards a sale.

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With AP

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