ASX set to fall as US rate hike bets ease

The Australian sharemarket is set to open lower on Thursday, following a mixed session on Wall Street as investors assessed a series of economic data releases pointing to continued strength in the United States economy.

ASX 200 futures were down 48 points, or 0.5%, at 8,765.

Overnight in the US, the Dow Jones Industrial Average fell 0.9%, the S&P 500 declined 0.3%, while the Nasdaq Composite gained 0.2%.

A series of economic data releases pointed to continued strength in the US economy, while a key inflation measure showed prices increased more slowly than expected in August. The data prompted traders to further reduce their expectations for a Federal Reserve interest rate hike in October.

"What the market is focused on is, is the economy continuing to grow and can it manage those higher interest ​rates? And I would say so far, the market has looked kind of like history that when the economy is growing, when profits are strong, when there's a secular theme, it will look past higher interest rates," Anthony Saglimbene, chief market strategist at Ameriprise Financial in Troy, Michigan was quoted as saying in a Reuters story.

"However... if these higher rates stay at these elevated levels for longer, it's likely to start doing potentially more damage to the bond side of the portfolio, ​it could limit credit or available credit. And if investors start to feel those conditions could weigh on economic growth or weigh on corporate profitability over the next quarter or two, ​then I think you would see a very swift negative reaction in the market."

Meanwhile, the Australian sharemarket extended its gains on Wednesday after local inflation came in softer than expected, reducing the chances of an aggressive tightening cycle by the Reserve Bank of Australia.

The S&P/ASX 200 Index rose 80.0 points, or 0.9%, to 8,789.3, with 10 of the 11 sectors finishing in the green.

On the bond markets, Australian 10-year and two-year yields were each up 0.1% at 5.386% and 4.994%, respectively.