US markets were closed on Monday for the Labor Day holiday, although equity futures pointed to a cautious start when trading resumes.
Dow Jones Industrial Average futures fell 308 points, or 0.6%, while S&P 500 futures slipped 0.2%. Nasdaq 100 futures bucked the trend, edging 0.1% higher.
Investors remain focused on the Iran war after the US and Iran exchanged strikes over the weekend, adding to concerns that higher energy prices could keep inflation elevated and influence the Federal Reserve’s interest rate decision next week.
Markets are currently pricing in around a 60% probability of a 25-basis-point Fed rate rise. Those expectations could shift later this week, with US producer inflation data due Thursday followed by consumer inflation figures on Friday.
Trade is also back in focus, with Canadian retaliatory tariffs on around US$20 billion of US goods taking effect on Tuesday, adding another source of uncertainty for markets.
Oil prices reached six-week highs following the latest escalation in the Iran war, with Brent crude rising 1.1% to US$97.31 a barrel and WTI gaining 1.3% to US$92.66.
Australian Market Outlook
Australian shares are set to drift lower at the open, with S&P/ASX 200 futures down 6 points, or 0.1%, to 8,991.
The local market is likely to take its lead from higher oil prices, global bond yields and expectations for interest rates, with US markets providing little direction following the Labor Day holiday.
European shares finished broadly flat overnight as inflation concerns from higher crude prices offset stronger-than-expected eurozone economic data. Germany’s DAX slipped 0.2%.
Investors will continue to monitor developments in the Iran war ahead of this week’s key US inflation readings and next week’s Federal Reserve policy decision.
