The Australian sharemarket logged its sharpest one-day loss since early May, as a shift in risk sentiment – driven by sticky US inflation and renewed US tariff rhetoric – prompted investors to take profits and cut the odds of a near-term interest rate cut.

Traders dialled back expectations for a September rate cut from the Federal Reserve after fresh US inflation data showed tariffs were starting to filter into consumer prices. The probability of a rate cut fell to 54.4 per cent, down from 58.9 per cent a day earlier and 60.8 per cent last week.

That sent shares lower on Wall Street and Australia’s S&P/ASX 200 Index down 0.8 per cent from a record high to close at 8561.80. That was the steepest decline since a 1 per cent fall on May 5.

IG market analyst Tony Sycamore warned that the ASX could be at a turning point. “If the ASX 200 loses support around the 8530-8510 range [from here], it could open the door to a deeper correction – potentially towards the 200-day moving average near 8250,” he said.

Australia’s big banks led the broad-based decline with National Australia Bank tumbling 3.4 per cent to $38.27, despite the board reiterating its support for chief executive Andrew Irvine amid scrutiny over his management style and behaviour at client events.

Westpac dropped 1.5 per cent, Commonwealth Bank 1.2 per cent and ANZ 0.6 per cent.

The weakened sentiment also affected the materials sector, with Citi analysts urging investors to “fade the rally” in iron ore, citing speculative buying linked to China rather than fundamental strength.

Still, iron ore futures rose 1.2 per cent in Singapore to above $US100 a tonne, on optimism China might announce further property stimulus. Even so, BHP fell 0.7 per cent, while Rio Tinto reversed its earlier falls to close 0.2 per cent higher at $110.52. It posted a 13 per cent year-on-year rise in copper-equivalent output and its strongest Q2 iron ore production since 2018.

Elsewhere, CSL weighed on the healthcare sector, falling 1.3 per cent to $247.45, after US President Donald Trump signalled potential tariffs on pharmaceuticals by the month-end.

Stocks in focus

In company news, Megaport jumped 6.3 per cent to $14.05 after Macquarie upgraded the stock and set a $14.30 target.

Rare earth miners climbed after a $US500 million deal between MP Materials and Apple to boost iPhone component production in the US. Iluka Resources added 4.3 per cent at $4.88 in the latest bullish tailwind for the emerging player following Macquarie recently placing it as one of its top ASX 200 stock picks.

Newmont fell 5.7 per cent to $87.70 after chief financial officer Karyn Ovelmen’s surprise resignation and amid news the gold producer had sold stakes in Greatland Resources and Discovery Silver for $470 million.

South32 slipped 3 per cent to $2.88 after UBS cut its price target from $3.20 to $3, citing uncertainty over the Mozal smelter’s power supply and worsening drought conditions.

Evolution Mining dropped 2.3 per cent to $7.52 after forecasting strong cash generation from FY26, supported by a record $2.3 billion in operating mine cash flow.

And Lendlease reversed early gains to finish 1.7 per cent lower to $5.09 after confirming it had secured a prime site at 175 Liverpool Street in Sydney’s CBD for a planned $2.5 billion luxury residential tower.

That’s a wrap on today’s news. Join us again soon for more live markets news.