Australia

Australian shares are set to extend gains after US shares rallied as investors shopped for bargains among beaten down stocks in the first day of trading since last week’s savage selloff.

ASX futures were up 48 points or 0.7% at 6463 as of 8.00am on Wednesday, pointing to a modest jump at the open.

Overseas, the S&P 500 gained 2.4% with all 11 sectors rising. The Dow Jones Industrial Average added 2.1%. The Nasdaq Composite Index jumped 2.5%, buoyed by big gains at beaten down growth stocks such as data and software company Palantir Technologies and chip maker Nvidia, which both gained more than 4%. US share markets were closed on Monday for a holiday.

Investors' appetite for riskier assets on Tuesday follows a tumultuous week in markets, sparked by the Federal Reserve's approval of a 0.75-percentage-point interest-rate increase, the largest since 1994. Investors scrambled to unload riskier assets amid growing fears that central bankers would plunge the US economy into a recession. The benchmark S&P 500 finished the week 5.8% lower, its largest one-week decline in more than two years.

"This still feels like a bit of a dead-cat bounce," said Viraj Patel, global macro strategist at Vanda Research, referring to a term used to describe a brief market rally. He said investors' willingness last week to dump shares of winning sectors this year, including energy and utilities stocks, might be a signal that this year's drawdown has entered its latter stages. Still, he said, he believes the selloff "still has legs to go."

Locally, the S&P/ASX 200 closed 1.4% higher at 6523.8, snapping a seven-day losing streak on a bounce by beaten-down financial, commodity and real-estate stocks.

Australian sentiment was also aided by the Reserve Bank, with governor Philip Lowe telling business leaders in Sydney the cash rate was unlikely to hit four per cent by year-end as market pricing has been suggesting, and that he didn't see a recession on the horizon.

Banks Commonwealth, ANZ, Westpac and NAB put on between 2.4% and 3.8% as the financial sector, which shed 15% over the prior two weeks, jumped 2.65%.

The energy sector rebounded 2.8% from the prior session's 5.2% fall, while iron-ore and lithium miners also bounced. BHP, Rio Tinto and Fortescue gained between 1.7% and 3.5%.
Shares of gold miners fell amid softer gold prices.

The ASX 200 is still down 9.5% in June and on course for a third consecutive monthly fall.
In commodity markets, Brent crude oil added 0.7% to US$114.89 a barrel. Iron ore rose 3.2% to US$115.90. Gold futures edged down 0.2% to US$1835.10.

Local bond markets saw a action at the shorter end of the curve as the Reserve Bank Governor appeared to rule out a 0.75% rate hike at the next board meeting in July. The yield on Australian 2 Year government bonds declined to 3.1% while the 10 Year closed was flat at 4.06%. Overseas, the yield on 2 year US Treasury notes gained to 3.20% and the yield on the 10 year US Treasury notes advanced to 3.27%.

The Australian dollar gained to 69.67 US cents, up from 69.52 at the previous close. The Wall Street Journal Dollar Index, which tracks the US dollar against 16 other currencies edged up to 97.18.

Asia

Chinese stocks closed lower, as losses among nonferrous metals stocks offset gains by financials. Upward momentum in the China market appears to be lacking, with some pressure from narrowing US-China bond yields, Shanxi Securities said in a note. Ganfeng Lithium shed 3.4% and China Northern Rare Earth slumped 8.3%, while China Life Insurance added 4.2% and Postal Savings Bank gained 2.5%. The Shanghai Composite Index lost 0.3% to 3306.72, the Shenzhen Composite Index dropped 0.5% and the ChiNext Price Index was 0.6% lower.

Hong Kong stocks ended higher, with the benchmark Hang Seng Index rising 1.9% to 21559.59. Investor sentiment was buoyed as futures tied to US equity benchmarks rose, allowing "the buy-the-dippers to dip their toes in the market," Oanda senior market analyst Jeffrey Halley said in a note. Gains were broad-based, led by Alibaba Health Information Technology's 12% surge. ENN Energy rose 5.6%, while Wuxi Biologics advanced 5.0%. Technology stocks also rose, with the Hang Seng Tech Index ending up 2.2% higher at 4760.14.

The Nikkei Stock Average closed 1.8% higher at 26246.31, supported by energy and property stocks. Sentiment was partly supported by a recent Nikkei survey which showed that Japanese companies are looking to invest 25% more in equipment, real estate and other physical assets this fiscal year. Energy stocks led the gains, tracking higher oil prices amid some tightness in the global oil market. Idemitsu Kosan advanced 3.1% and ENEOS Holdings rose 2.9%. Stocks of property developers were also higher. Nomura Real Estate rose 2.7% and Hulic Co. added 3.8%.

Europe

European markets rose as traders rediscovered a spring in their step after Monday's US public holiday. The pan-European Stoxx Europe 600 was up 0.4cac 40%, the French CAC 40 gained 0.8% and the German DAX advanced 0.2%.

"The risk-asset rebound is gathering pace this afternoon, with US markets taking the lead in afternoon trading," IG analyst Chris Beauchamp writes. "An absence of any more big-name [central-bank] rate increases this week will have helped sentiment to stabilize and in any case, markets had reached a washout-low last week that seemed to promise at least a short-term bounce.

London’s FTSE 100 closed up 0.4% as a modest rebound in copper and other metals prices helped raise the basic resources sector with companies such as Antofagasta and Rio Tinto performing well. DS Smith was the day's best performer, closing up 3.7%, followed by Avast, up 3.2%, Antofagasta, which closed up 3%, and Fresnillo, up 2.7%.

North America

US stocks rallied Tuesday off their worst week since March 2020, offering investors a reprieve from a recent stretch of whipsaw trading that had sent stocks and cryptocurrencies falling.

The S&P 500 gained 2.4% with all 11 sectors rising. The Dow Jones Industrial Average added 2.1%. The Nasdaq Composite Index jumped 2.5%, buoyed by big gains at beaten down growth stocks such as data and software company Palantir Technologies and chip maker Nvidia, which both gained more than 4%.

Bitcoin rose alongside other cryptocurrencies, continuing to claw back some losses after a bruising weekend. Bitcoin inclined to $20,836.15, up 1.9% from its 5 p.m. ET value Monday, and about 18% higher from a recent low of $17,601.58 reached Saturday, according to CoinDesk data.

Investors' appetite for riskier assets on Tuesday follows a tumultuous week in the markets, sparked by the Federal Reserve's approval of a 0.75-percentage-point interest-rate increase, the largest since 1994. Investors scrambled to unload riskier assets amid growing fears that central bankers will plunge the US economy into a recession. The benchmark S&P 500 finished the week 5.8% lower, its largest one-week decline in more than two years.

Meanwhile, investors await further commentary from Federal Reserve Chairman Jerome Powell when he testifies before Congress on both Wednesday and Thursday.

"Investors will be looking for any inkling as to whether Chair Powell's commitment to another 0.75 percentage point rate hike is serious," said Michael Farr, president of Farr, Miller & Washington.

Both investors and policy makers are eager to see the June print for consumer inflation expectations, due Friday. At his news conference last week, Mr. Powell said the preliminary reading of 5.4% was "eye catching."

"Markets are going to watch the final read for consumer inflation expectations in the University of Michigan survey. They want to see how aggressive the Fed will have to be," said Rob Haworth, senior investment strategist at US Bank Wealth Management. "If expectations stop accelerating, markets may read that as Fed policy starting to work."

Investors and analysts say they expect more pain ahead in the markets, though some are still willing to wade in and buy stocks at a discount after a selloff that has dragged the S&P 500 down 21% this year. Many pointed to Tuesday's recovery as a bounce off last week's drawdown.

"This still feels like a bit of a dead-cat bounce," said Viraj Patel, global macro strategist at Vanda Research, referring to a term used to describe a brief market rally. He said investors' willingness last week to dump shares of winning sectors this year, including energy and utilities stocks, might be a signal that this year's drawdown has entered its latter stages. Still, he said, he believes the selloff "still has legs to go."

Tuesday's bullish mood came alongside a selloff in US government bonds, sending the yield on the 10-year US Treasury note higher. The yield on the benchmark note traded at 3.304%, up from 3.238% Friday. Yields and bond prices move in opposite directions.

Government leaders and officials in recent days have tried to assuage an increasingly jittery nation that an economic slowdown isn't guaranteed. President Biden on Monday said he spoke with Lawrence Summers, a former Treasury secretary, and reiterated that he doesn't see a recession as inevitable. Federal Reserve Bank of St. Louis President James Bullard also said the economy appears on track for more expansion this year.

Still, many market watchers are bracing for an economic downturn. In a note Monday, a team of Goldman Sachs economists increased their outlook for a US recession, citing concerns that the Fed will feel compelled to respond forcefully to inflation data, even if economic activity slows. The team now sees a 30% probability of entering a recession over the next year, versus 15% previously, and a 25% probability of entering a recession in the second year if one is avoided in the first.

Energy stocks led their peers. Diamondback Energy rose $9.99, or 8.2%, to $132.28. Exxon Mobil climbed $5.36, or 6.2%, to $91.48.

Brent crude, the international benchmark, rose for a second day, climbing 0.5% to $114.65 a barrel. Last week, oil prices fell amid concerns that a possible recession would weigh on energy demand.

Seema Shah, chief strategist at Principal Global Investors, said that for now, investors may see value in companies whose shares have been badly beaten down this year. However, she said, she expects the market to fall further once investors begin to see consistent declines in earnings growth.

"I think what you could see is a [modest] rally through the summer...and as you get into the autumn months and the next earnings season, I think a lot of the economic data is going to start to turn and earnings growth is going to start to turn," she said. Still, she noted, even now, "sentiment is deteriorating very rapidly."