ASX Slides as Oil Surge, Rising Yields Hit Wall Street

The S&P/ASX 200 fell 17.1 points, or 0.2 per cent, to 9066.7 in early trade, tracking losses on Wall Street where the S&P 500 dropped 0.9 per cent for its fourth decline in five sessions since hitting a record.

The Dow Jones Industrial Average lost 1.3 per cent and the Nasdaq composite shed 1 per cent, as a surge in crude oil prices and a sharp rise in Treasury yields reversed the calming effect of the US Treasury Department’s surprise bond buyback announcement.

Brent crude rose 2.4 per cent to $US93.41 a barrel after President Donald Trump threatened Iran with "the MOST CRUSHING ECONOMIC OPERATION EVER TAKEN AGAINST ANY COUNTRY," according to a report in The Sydney Morning Herald. The advance pushed the 10-year Treasury yield back to 4.70 per cent, almost retracing the drop that followed Treasury Secretary Scott Bessent’s decision to double the size of planned purchases of longer-term Treasuries.

Analysts cautioned that the buyback programme was too small relative to the $US40 trillion US government debt market to address fundamental investor concerns. The national debt topped $US40 trillion on Wednesday, a record that came months after it passed $US39 trillion in April, the report said.

Oil, Inflation Fears Return

The renewed jump in oil prices rekindled inflation fears and reinforced expectations that central banks may keep interest rates higher for longer. A column on Channel NewsAsia argued that the recent surge in the term premium — now at its highest in over a decade — suggests the Fed and Treasury have "some convincing to do" on the credibility of their policy stance. The column noted that oil is now up nearly 40 per cent year-on-year, and that diesel price moves in particular could make a September rate hike more likely than the 35 per cent probability currently priced by markets.

In the bond market, the 30-year Treasury yield rose 5 basis points. An auction of 30-year TIPS drew its strongest demand since December 2020, with a bid-to-cover ratio of 2.82, according to the column.

Wall Street: Retail Weakness, Energy Strength

Walmart fell 9.2 per cent, its biggest drop in four years, even after reporting stronger-than-expected profit and revenue. Investors focused on slowing underlying revenue growth and a profit forecast for the current quarter that missed expectations. The decline weighed heavily on the consumer staples sector, which fell 2 per cent, while the discretionary sector lost 1.7 per cent.

Advance Auto Parts tumbled 24.6 per cent after reporting weaker revenue. Chief executive Shane O'Kelly said "tighter household budgets constrained spending more than we anticipated, especially during the last four weeks of the quarter," as reported by The Sydney Morning Herald. Travel stocks also fell, with Norwegian Cruise Line Holdings down 3.4 per cent, United Airlines down 3.5 per cent and American Airlines off 2.5 per cent.

Energy stocks were the bright spot. Exxon Mobil rose 0.8 per cent and ConocoPhillips climbed 3.3 per cent as crude prices rallied. Deere & Co jumped 6.9 per cent after reporting stronger profit and revenue, and forecasting an acceleration in the agriculture equipment business.

Australian Movers

In Sydney, Guzman y Gomez rose 6.4 per cent in early trade after the fast-food chain reported network sales rose 17.9 per cent to $1.38 billion for the 2026 financial year, during which it opened 35 new restaurants across Australia, Singapore and Japan. The company posted a net loss of $26.7 million, at the lower end of a previously guided $30-40 million range, mainly due to one-off costs of exiting the US market. Excluding those costs, underlying net profit rose 29.7 per cent to $53.4 million. It declared a total fully franked dividend of 48 cents per share, including a special dividend of 14.4 cents.

The Australian dollar was trading at US71.10¢.

Asia Outlook

Regional markets were set for a weak open. Bloomberg reported that stocks in Asia were poised to drop after US equities fell, with investors betting the Treasury's efforts to contain borrowing costs may offer only a temporary reprieve. Japanese CPI inflation data due Friday is expected to show the core annual rate accelerating to 1.8 per cent in July from 1.6 per cent in June, still below the Bank of Japan’s 2 per cent target. Traders are pricing a one-in-three chance of a BOJ rate hike in September, similar to expectations for the Federal Reserve, according to the Channel NewsAsia column.

South Korea’s Kospi had surged 5.9 per cent on Thursday, driven by gains in Samsung Electronics and SK Hynix, but that rally appeared unlikely to spill over as global risk appetite soured. European indexes were little changed. Japanese and European flash PMI data are due later Friday, along with UK retail sales and Australian unemployment figures for July.