ASX to rise as US bond yields drop

The Australian sharemarket is set to open higher on Friday as the global bond sell-off at least temporarily reversed, while expectations for further US interest rate rises declined sharply. Oil prices surged back above US$102 a barrel.

ASX 200 futures were up 45 points or 0.5% at 8,678.

Among US benchmarks, the Dow Jones Industrial Average rose 0.04%, the S&P 500 gained 0.2% and the Nasdaq Composite added 0.04%.

"Even though valuations have come down, the market's still not cheap, so I'm not bearish on the equity market. We can chug along, but I expect higher volatility in both equities and bonds," Scott Welch, chief investment officer at Certuity in Potomac, Maryland was quoted as saying in a Reuters story.

"Everybody's adjusting to a new normal. There's nothing particularly scary about what's happening in the markets right now; it's just a little bit different than what people have been used to operating in over the past few years, and it's going to take some adjustment."

The Australian sharemarket fell on Thursday, dropping to its lowest level since mid-June as rising US bond yields and a late sell-off on Wall Street weighed on sentiment and capped a downbeat September quarter.

The S&P/ASX 200 Index fell 174.9 points or 2% to 8,614.4, with all 11 sectors finishing in the red.

On the bond markets, the Australian 10-year yield was up 0.02% at 5.369%, while 2-year rates were down 0.1% at 4.946%.