8@eight: ASX set to fall as Wall Street retreats

The Australian sharemarket is poised to give back yesterday's gains after Wall Street slid overnight.

1. Wall Street rebound loses steam as markets ponder Fed policy: Monday's spirited recovery in risk appetite lost steam, with the bellwether S&P 500 stock index limping into the close with a narrow loss. A rethink of Fed policy trends may have been the underlying force driving price action. Tellingly, rates-sensitive technology names led the selloff, shedding over 1.5 percent while the "safer" and more cash-rich utilities space flourished, adding 2.3 percent. If last week's turmoil was truly an overreaction, the Fed may find greater room to indulge its seemingly growing appetite for tightening. This seemed to elude investors yesterday amid an exuberant reversal of the prior two session's blockbuster losses.

2. Fed outlook rethink stokes US Dollar recovery: The greenback suffered yesterday as ebbing trade war jitters revived speculation that a broadening global recovery will push top central banks to play catch-up to the Fed's hawkish lead, eroding the greenback's yield advantage. Today's reevaluation of what a sentiment recovery means for rate hike prospects marked a reversal. That global reserved currency roared higher, adding over 0.5 percent to register its biggest daily gain in three weeks.

3. Commodities retreat amid USD recovery: The US currency's resurgence was not difficult to spot in the commodities space. Most raw materials prices are denominated in terms of the benchmark unit, so its advance applied de-facto downward pressure. Gold fell amid fading anti-fiat demand despite a drop in front-end bond yields as losses in the equities space pushed capital flows toward the safety of Treasury bonds. Cycle-sensitive crude oil prices edged down alongside US shares.

4. ASX: Today's retreat in New York trade may be echoed once Australian shares come back online but technical cues hint at scope for a larger recovery after the ASX snapped last week's the series of lower highs and lows.

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