ASX 200 Outlook: Oil, Yields and Global Equities Drive Market Risk
By Matt Simpson, Market Analyst
Date: March 6, 2026
Market Overview
The ASX 200 index has ended its three-week winning streak, influenced by a bearish engulfing pattern that formed just below its record high. The market sentiment has been negatively impacted by rising oil prices, increasing bond yields, and shifts in global equity markets. This pullback raises concerns about a potential deeper retracement, although key support levels are still in proximity, which could dictate whether the index stabilizes or continues to decline.
Sector Performance
During the recent trading week, five out of the eleven ASX sectors experienced declines, with the materials sector leading the downturn. Conversely, the information technology sector was the only one to show gains. Notable stock movements included:
- Woodside Energy (WDS) closed above 30 for the first time this year, remaining just 5.5% below its record high.
- Wesfarmers (WES) has seen a decline of 13.8% since its earnings report, marking its third consecutive week of losses.
- Woolworths (WOW) reached a 2.5-year high, now only 2% shy of its record high.
Correlation with Global Markets
The ASX 200 is closely linked to materials and global equity markets, reflecting its commodity-heavy structure. Long-term correlations indicate a strong alignment with materials, financials, and major global indices like the Nikkei and FTSE 100. Currently, the ASX 200 shows a near-perfect correlation with US equities, particularly the S&P 500 and Nasdaq, while moving inversely with bond yields, suggesting that rising yields have been a pressure point for equities.
Technical Analysis
The weekly chart indicates a significant bearish engulfing pattern just below the all-time high, with a 3.8% decline marking the worst week since late March. A long-term bearish divergence is forming on the RSI, raising questions about the potential for a more significant market top. Factors such as geopolitical tensions in the Middle East and higher oil prices, combined with a hawkish stance from the Reserve Bank of Australia (RBA), have contributed to the current market sentiment.
On the daily chart, a bearish engulfing day was noted, although the range was smaller compared to earlier selloffs. The volatility remains elevated, and the index closed just above the 8,850 options cluster, which may act as near-term support. If positive developments arise from the Middle East, a bounce from these levels could occur, but resistance is clearly defined around the 9,000 and 9,025 levels. Key support levels to watch include 8,800, 8,870.6 (200-day SMA), and 8,700.