ASX slumps to seven week slow as global inflation fears escalate

Added: 2026-05-18

[00:00:01]Coming up the Australian share market hits a 7-week low on global interest rate fears. We take a look at the currency impact and more.

[00:00:10]>> [music] [music] [music] >> Everyone, welcome to the space on the money podcast for this Monday, the 18th of May, 2026. A day with the Australian share market tumbled to a 7-week low, down 1 and 1/2%. It follows another rally in the oil price and its flow-on effects, which are likely to weigh on the minds of global central banks. And experts tell me the longer the Middle East crisis goes, the harder global markets will be hit. Brent crude surged to above 110 US today. Remember, before the war, it was trading at around 60.

[00:00:57]But, 3 months of elevated prices are now flowing through to the broader economy.

[00:01:01]Late last week, US inflation hit a 3-year high of 3.8% and now investors are pricing in the chance of interest rate rises there. As a result, our share market tumbled. Brambles slammed, losing 20% after it downgraded its full-year earnings guidance. The miners were also lower. BHP down nearly 3%. For more on today's market action, I spoke with David and Scott from StoneX. David, so the Aussie market not having the best start to the week. To what extent are rising oil prices once again flowing through to investor sentiment? Because late last week, we saw stronger than expected inflation data out of the US.

[00:01:34]And now investors are looking to potential interest rate rises there later in the year.

[00:01:40]Ricardo, great to be back. Uh you're right. A lot of it is coming down to what's going on when it comes to the energy side of the story, but more so now, the inflationary side and how central banks will go and respond to that. Uh you mentioned about what the uh Federal Reserve has got in place now.

[00:01:52]They've got 14 basis points of hikes priced in. If you go back to before the war started, it was actually two full cuts of the price in. And that's sequentially forcing other central banks to respond as well. So, we have lots of pressure on the BOJ, the BOE. We know that RBA has already gone three times in a row. And it could well go in June depending what happens with the labor force survey. That's is all adding to pressure on cyclical assets like the ASX.

[00:02:18]Yes, so tell us more about how this is becoming a bit of a global issue because are we entering a phase where we're seeing higher interest rates around the world? And And what about here? You're saying the potential for June?

[00:02:31]There's definitely the potential for June. It's about 20% priced. It will come down to how long this crisis persists for and what happens in the labor market. If the labor market starts to weaken, the RBA will probably go and hold off for the time being. If it continues to strengthen, it continues to remain strong, there's every chance it could go and make it four in a row. More broadly, absolutely, this is a global phenomenon now and it is not simply an energy price story. That was the initial shock. Now, what we're seeing is clear evidence emerging in inflation reports, particularly at the producer price level where you're seeing upstream price pressures are acute. And that is now filtering through down into our economic cycles and it's really starting to go and pressure that interest rate and that growth outlook.

[00:03:17]How's it flowing through to the currency market? We've seen the Australian dollar trade at near four-year highs last week.

[00:03:21]It's come off a bit though more recently.

[00:03:25]It has. It's not really been a story about interest rate differentials for the Aussie recently. It's been more a story about risk appetite and how more broadly that's gone and evolved. That's really been the key driving factor. So, the fact that what we've seen is this big turnaround in risk sentiment. If you combine over the top of that some technical factors, there was a breakout in the US dollar index which has really seen its strengthen against those major names. And the combination This meant that the likes of the Aussie dollar, the Kiwi, those high beta cyclical currencies have really been hit hard today.

[00:03:57]One corporate story I'd love to mention if you're able to comment on it.

[00:04:00]Locally, an interesting story is that that of the Treasurer, Jim Chalmers, forcing some foreign shareholders of rare earth miner Northern Minerals to sell their shares amid fears of Chinese influence. What are the broader concerns here?

[00:04:14]Well, when it comes to rare earths, it really comes down to a story. It is dominated by China. So, they have such a big strong grip on that marketplace that anything, any assets that are outside of China's jurisdiction become immediately more valuable when it comes to supply chains. And look, from what you can read in the other press about it, this is not the first time they've been warned to go and divest these particular holdings, but I think it comes back to security alliances, who is Australia aligned alongside, and I think that probably explains a lot what's going on in that space.

[00:04:43]There are two letters we haven't mentioned yet in this interview, and that's AI, right? Earning seasons continue in the US, and Nvidia the standout. Of course, it's an AI chip maker. What are they, these results likely to say about the state of the US economy, and what are the implications for investors?

[00:04:59]When it comes to the real economy, I don't think it's going to go and tell you much at all. I think what they'll probably go and tell you is that the circular funding that we've seen by all these AI, these hyperscalers out there to go and put the infrastructure in place is going to really juice earnings.

[00:05:12]I'll be surprised, really surprised if we see revenue miss, if we see their forecast for revenue next quarter miss.

[00:05:19]I think it's just going to tell you that there's a lot of demand for this rollout. But, where the key point is about this whole AI story is will it go and lead to consummate revenues coming through? Will the return on investment be justified? And at this point in time, I still think that's way too early to determine.

[00:05:35]And so, going back to what we started with today, given that we're now seeing a period of these inflation being passed on to consumers, the secondary impacts from the war in the Middle East, what are you telling your clients right now and where do you see the opportunities for investors?

[00:05:51]Be very cautious out there at this point in time, particularly in those areas of the market that have run very hard on AI hopes, on the other fact that we'd get a quick resolution in the Iran war.

[00:06:02]At this point in time, a lot of those cyclical parts of the market in particular, they were performing very strongly, they started to underperform, but they are the ones in particular that I think are very vulnerable at this point in time. The longer this crisis persists, the longer we start to go and worry about elongated energy supply disruptions, the worse that performance will be, including unfortunately the likes of the Australian market.

[00:06:26]That's David Scutt there from StoneX and he wraps up the podcast for this Monday.

[00:06:30]Give it a like, a review, and subscribe if you enjoy it. Don't forget you can watch On the Money during the 6:30 weekday edition of SBS World News on SBS. The podcast returns tomorrow, it drops after the market close every weekday, and I'll catch you then. This SBS On The Money [music] podcast is provided for informational purposes only and should not be understood as constituting advice or [music] a recommendation. It is not personal advice and it does not consider your personal circumstances or objectives.

[00:06:55]You should contact [music] a licensed professional before making any financial decision.