ASX Falls on Inflation Fears and Rate Hike Expectations

Australian shares took a hit as concerns over inflation and interest rates weighed on mining stocks. The S&P/ASX 200 dropped 0.5%, with the mining sub-index sinking 2.2% to its fourth straight decline.

The slump in iron ore, copper, and gold prices was largely to blame, with BHP, Rio Tinto, and Fortescue among the worst performers. Gold miners also suffered, with Northern Star and Evolution Mining leading the pack down.

The bigger driver behind these losses lies outside Australia, where higher oil prices have investors worried about inflation sticking around. This has central banks, like the Fed in the US, setting their interest rates based on price expectations.

CME Group's FedWatch tool shows a 90% chance of a 0.25 percentage point rate hike at this week's meeting, which could strengthen the US dollar and put pressure on commodity prices.