Oil prices and bond yields are both moving higher once more, a pattern last seen in 2022. Brent crude is being sold for approximately US$100 per barrel. The current issue is whether the ASX 200 will have a similar trend.
A look back at 2022 and 2023 shows when the selling finally stopped. Both lows came within weeks of a peak in US bond yields. Those yields show no convincing sign of peaking, so Australian stocks are still waiting for the signal.
Oil Prices and Bond Yields Hit Markets in 2022
Russia started its move into Ukraine on 24 Feb 2022. This was also a time when commodity markets were already tight after the pandemic. Within two weeks, prices jumped.
| Commodity | Move after the invasion |
| Brent crude | From about US$90 a barrel in Feb 2022 to US$139 on 7 Mar 2022 |
| Wheat | Up nearly 45% to a 14-year high |
| Newcastle thermal coal | Up 85% to a record US$440 a tonne |
| Aluminium | Above US$4,000 a tonne, a record |
| Nickel | Topped US$100,000 a tonne on 8 Mar 2022 |
The Bloomberg Commodity Index had increased by up to 27.5% by early Jun 2022. The Fed increased interest rates for the first time in this cycle on 17 Mar 2022. By Oct 2022, Wall Street’s benchmark index had shed nearly 20%. The ASX 200 held up better, losing just under 10%.
Inflation Prints Swung Markets Through 2022
Three Releases That Moved Wall Street
US CPI day became the biggest date on the calendar. A small miss or beat could change the size of the next Fed hike.
| Date | US CPI result | Market reaction |
| 10 Jun 2022 | 8.6% against 8.3% expected | US benchmark down 2.9% on the day and a further 3.8% on the next session |
| 13 Jul 2022 | 9.1%, the highest since 1981 | The peak of the cycle |
| 10 Nov 2022 | 7.7% against 7.9% expected | US benchmark gained 5.5%, and the ASX 200 added 2.8% a day later |
Base Effects Pulled Inflation Lower
Annual inflation considers price change relative to what it was in this month of the previous year. When that spike from 2022 actually became the comparison month, the year-on-year rate fell sharply, even as prices remained high.
US headline inflation fell steadily for 12 months from a peak of 9.1% in Jun 2022 to as low as 3.0% in Jun 2023.
Oct 2023 Low Followed a Peak in Yields
As of Jul 2023, Brent crude was down to the mid-US$70s. Then in Aug 2023, bond yields climbed higher again. By Sep 2023, the US 10-year yield had broken above its Oct 2022 high of 4.33%.
Powell spoke at the Economic Club of New York on 19 Oct 2023. He said inflation was still too high. Asked whether policy felt too tight, he said: “I would have to say no.”
That same day, the 10-year yield rose above 5%, a level not seen since Jul 2007. The S&P 500 hit its low on 27 Oct 2023, and the ASX 200 followed on 30 Oct 2023.
Earnings Gap Shapes the ASX 200 Outlook
Wall Street has not seemed too shaken by the recent jump in yields. Market forecasts point to S&P 500 profit growth near 32% for calendar 2026. The forecast for 2027 is a further rise of about 16%.
Australian stocks do not have the same cushion. ASX earnings are forecast to slow to about 4% in FY27. That gap matters for the ASX 200 outlook.
Figure 1: Large blue ASX lettering on display inside an exchange building lobby [Courtesy: SMH]
Industry Outlook for Australian Stocks
The strength of an economy can increase both yield levels and expectations for future earnings. With no present danger to the economy, high yields and resilient markets can co-exist.
For Australian stocks, the resources sector carried FY26 earnings, while the banking sector offers little growth.
ASX 200 Market Snapshot
- ASX 200: down 0.07%
- All Ords: down 0.07%
- Small Ords: up 0.28%
- All Tech: down 0.03%
- Resources: down 0.25%
Future Direction and Impact on Australian Stocks
Bond yields show no convincing sign of peaking, and Brent trades around US$100 a barrel. Both past lows came within weeks of a yield peak, so that is the signal to watch.
Colitco will keep tracking oil prices and bond yields as they shape the ASX 200 outlook for Australian stocks.
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FAQ
Q1. Why does 2022 matter for the ASX 200 outlook?
Ans. Oil prices and bond yields spiked then, as they do now. Markets only bottomed once yields peaked.
Q2. On which date did the ASX 200 reach its 2023 low?
Ans. It hit its low on 30 Oct 2023, the trading day after Wall Street’s low.
Q3. How do Australian stocks differ from US stocks now?
Ans. The S&P 500 is tipped for profit growth near 32% in 2026. ASX earnings should grow only about 4% in FY27.
Q4. Which signal should investors watch for a market low?
Ans. A peak in US bond yields. Both the 2022 and 2023 lows arrived within weeks of one.
Disclaimer
This article is meant only for informational purposes. If you are an investor who is watching the Australian market closely, all the data published in the content is sourced from Market Index and external sources. Kindly verify all the information related to the share price and market data. Any investment should be made at the investor’s own risk. Colitco does not hold any position in the above-mentioned markets.
Luke Carlino is a seasoned Copywriter, Content Strategist, and Social Media Manager specialising in Mining, Finance, and Business journalism. With more than a decade of industry experience, he brings rigorous editorial standards and commercial acuity to every project.
