Australia

Australian shares are poised to fall for a third day as global investors dumped stocks and commodities amid growing fears central banks will slam the brakes on growth in their quest to curb inflation.

ASX futures were down 99 points or 1.4% at 7003 as of 8.00am on Tuesday, suggesting yesterday’s losses will extend into the open.

Overnight, the S&P 500 fell 3.2%, adding to losses after closing out its longest streak of weekly declines since 2011. Monday marked the first time the index closed below the 4000 level since March 2021. The Nasdaq Composite tumbled 4.3%, and the Dow Jones Industrial Average shed 2%, ending at its lowest level since November 2020.

Market volatility reflects doubts over whether central banks can bring down inflation without short-circuiting growth in a world where Chinese lockdowns are already heaping pressure on snarled supply chains and war in Eastern Europe is keeping commodity supplies uncertain.

"The market doesn't know how high the Fed has to go to control inflation, and we have the sense of a global slowdown," said Sebastien Galy, a macro strategist at Nordea Asset Management. "There is a lot of negatives that are happening in the market."

Chinese export growth fell to its lowest level in two years on Monday, confirming fears that severe Covid restrictions are hampering activity in the world’s manufacturing hub.

Commodities retreated following the weakness in the world’s largest raw material importer. Brent crude oil fell 5.7% to US$105.94 a barrel. Iron ore fell 5.5% to US$131.35. Gold was caught up in the downdraft and slipped 0.3% to US$1852.90.

Locally, the S&P/ASX 200 closed down 1.2% lower at 7120.6, its lowest close since the middle of March.

Every sector except healthcare was in the red. Property trusts were the biggest loser, collectively falling 4.2 per cent as warehouse company Goodman Group dropped 7.0% to a nearly one-year low of $19.16.

Technology was one of the worst performing sectors, falling 3.2%. Novonix declined 12.3% and was the benchmark index's worst performer on Monday. Megaport and Life360 lost 8.6% and 6.3% respectively.

Fund manager Magellan fell 8.4% after announcing it had agreed to sell its interest in Mexican cuisine chain Guzman Y Gomez for $140 million, a 36.3 per cent premium to its entry price 16 months ago.

TPG Telecom gained 2.3% after it agreed to sell its mobile tower and rooftop infrastructure for an enterprise value of A$950 million.

Westpac closed 3.2% higher, after its 1H profit beat expectations. CBA and NAB closed 0.3% and 0.2% higher, respectively, while ANZ ended 2.7% lower.

The mining sector dropped 2.1% amid a fall in the iron ore price.

In bond markets, the yield on the Australian 2 Year government bond was flat at 2.72% while the 10 Year continued its climb to 3.56%. Overseas, yields on US Treasury 2 Years tumbled to 2.59%, while the 10 Year edged down to 3.03%.

The Australian dollar edged lower, buying 69.48 US cents as of 7.00am on Tuesday, down from the previous close of 70.75. The Wall Street Journal Dollar Index, which tracks the US dollar against 16 other currencies, rose to 96.36.

Asia

Chinese stocks ended mixed, after data showed China's export growth hit its lowest level in nearly two years. The Shanghai Composite Index inched 0.1% higher to 3004.14, the Shenzhen Composite Index rose 0.4% to 1865.92, while the ChiNext Price Index declined 0.8% to 2228.07. Oil-related stocks, however, were higher, following data that showed China's crude oil imports in April grew almost 7% on year. Sinopec Oilfield Service rose 1.1%, PetroChina added 0.9% and Yantai Jereh Oilfield Services Group gained 2.0%. Coronavirus-related developments will remain closely watched. "Despite overall improving situation, with daily new cases falling from the peak, the disruption to overall economic activities has not lessened," OCBC analysts say in a note.

Hong Kong shares were closed for a public holiday.

Japanese stocks ended broadly lower, as concerns persisted about higher costs of borrowing and raw materials. Among the biggest losers, Nippon Paint Holdings dropped 8.0% and food company Ajinomoto lost 7.0%. Japan Steel Works tumbled 19% to the limit-down level of Y3,025 after it said inspection data for some products was altered improperly at its unit. The Nikkei Stock Average fell 2.5% to 26319.34. The yield on the 10-year Japanese government bond rose half a basis point to 0.245%. Earnings remained in focus.

Europe

The pan-European Stoxx 600 index closed 2.9% lower at a two-month low of 417.46, tracking sharp falls in US equities on fears that high inflation would dent economic growth.

"Talk of recession is rife as markets really begin to price in a series of interest-rate rises," says AJ Bell's Danni Hewson. "If anyone was hoping a new week would bring a marked change in sentiment they were in for some serious disappointment," she says in a note.

Focus this week will centre on Wednesday's US inflation figures. Travel stocks are among the biggest fallers, alongside tech, energy and mining stocks. Germany's DAX ended 2.2% lower, France's CAC 40 lost 2.8%.

London’s FTSE 100 ended down 2.3% on Monday as caution ahead of US inflation data due on Wednesday and China's weak trade numbers dampened the index.

"The stubborn pursuit by Chinese authorities of a zero-Covid-19 policy is raising concerns that it will have a chilling effect on the Chinese economy in the months ahead," Michael Hewson, an analyst at CMC Markets, says in a note.

Furthermore, the prospect of a large interest-rate hike by the US Federal Reserve as well as the continuation of the war in Ukraine also helped "to pile the pressure on markets," AJ Bell investment director Russ Mould says in a note.

North America

The most punishing market selloff in years showed no signs of abating Monday, with US stock indexes sliding to new lows for 2022 and other assets, like oil and bitcoin, tumbling as well.

Markets have been shaken this year by a flood of investor worries. Inflation is running at its fastest pace in decades, threatening to eat into corporate profits and rein in consumer spending. Economic growth is slowing. And the Federal Reserve is kicking off what analysts anticipate will be its most aggressive monetary policy tightening campaign since the 1980s -- something many investors worry may tip the economy over the edge into recession.

Few believe a recession is imminent. The labour market has continued to add jobs at a rapid clip. Wages are climbing, and the unemployment rate remains near a 50-year low. But economists say there is a growing probability of a slowdown in the coming year, with those surveyed by The Wall Street Journal estimating a 28% probability of a recession sometime in the next 12 months -- up from 18% in January.

The outlook for the global economy also is looking increasingly murky, investors say. Supply chains already were snarled heading into this year. Lockdowns in China aimed at containing the spread of Covid-19 and Russia's war against Ukraine have heightened fears about how growth will hold up around the rest of the world. In the face of so much uncertainty, it is little wonder that markets have been as volatile as they have been over the past several weeks, investors say.

"The days of market whiplash are just beginning," said Andy Kapyrin, co-chief investment officer at RegentAtlantic, a registered investment adviser based in New Jersey and New York.

The S&P 500 fell 3.2%, adding to losses after closing out its longest streak of weekly declines since 2011. Monday marked the first time the index closed below the 4000 level since March 2021. The Nasdaq Composite tumbled 4.3%, and the Dow Jones Industrial Average shed 2%, ending at its lowest level since November 2020.

Later this week, investors will get another read on inflation when the Bureau of Labor Statistics releases its consumer-price index. Economists are expecting data to show inflation fell from March's level, which marked a four-decade high.

Any surprise to the upside could spur fresh volatility across markets, analysts say. Investors had initially been relieved last week when the Fed, which raised interest rates by half a percentage point, said it wasn't looking at larger rate increases. That feeling soon gave way to anxiety as investors grappled with the reality that the Fed may be forced to rethink its plans if inflation fails to ease up in the coming months.

"The market doesn't know how high the Fed has to go to control inflation, and we have the sense of a global slowdown," said Sebastien Galy, a macro strategist at Nordea Asset Management. "There is a lot of negatives that are happening in the market."

Selling hit most sectors of the S&P 500 on Monday. Shares of everything from manufacturers to banks to even energy producers, a relative bright spot this year, ended the day lower.

Facebook parent Meta Platforms fell $7.56, or 3.7%, to $196.21, while Amazon.com lost $119.57, or 5.2%, to $2,175.78 and Apple shed $5.22, or 3.3%, to $152.06. Technology stocks have been particularly hard hit by this year's selling because rising rates have made many investors reluctant to put money in parts of the market that look expensive.

Industrial stocks took a hit as well. Investors tend to view the group as an economic bellwether, since its profits tend to be particularly sensitive to changes in the growth outlook. Caterpillar fell $8.36, or 3.9%, to $206.29 and Boeing lost $15.59, or 10.5%, to $133.31.

Even parts of the market that have held up relatively well this year retreated Monday.

The S&P 500 energy sector slumped 8.3%, posting its biggest one-day decline since June 2020.

Energy shares had soared for the past few months alongside oil prices. But lately, some traders have begun to worry that lockdowns to contain the spread of Covid-19 in China will sap global demand for the commodity. That has taken some steam out of the rally. US crude oil fell 6.1% to $103.09, logging its worst day since March.

Meanwhile, a selloff in cryptocurrencies accelerated, sending the price of bitcoin tumbling to around $30,000. Bitcoin, along with other cryptocurrencies, surged the past few years as rock-bottom interest rates encouraged investors to seek out riskier markets with potentially bigger returns.

The swift rise in interest rates this year has brought that rally to a halt. Now, investors say they are being forced to rethink the attractiveness of many trades that had flourished in a low-rate, low-growth environment.

The yield on the benchmark 10-year Treasury note was at 3.080% on Monday, compared with 3.124% on Friday. The 10-year yield, which rises as bond prices fall, has risen nearly 1.6 percentage points since the end of 2021.