Australia

Australian shares are set to rally at the open amid a jump in the iron ore price and a strong finish on Wall Street led by beaten-down technology stocks.

ASX futures were up 77 points or 1.1% at 7245 as of 8.00am on Friday, pointing to a gain at the open that would more than reverse yesterday’s losses.

US indexes wavered early in the session before picking up steam. The benchmark S&P 500 gained 1.8%, while the tech-focused Nasdaq Composite added 2.7%, with Amazon, Alphabet and Netflix increasing more than 3%. The Dow Jones Industrial Average rose 1.3%. Major stock indexes declined Wednesday to start the month.

Investors have struggled in recent months to assess how much and how quickly the Federal Reserve will boost interest rates in a quest to temper inflation. Some money managers worry that policy tightening could slow economic growth or even tip the US into a recession. Supply-chain disruptions exacerbated by the pandemic have been further hit by the war in Ukraine and China's zero-Covid strategy, lifting to the cost of energy, food and other commodities.

"Markets moved up too much too fast as a result of all the stimulus, liquidity and Covid-19,” said Joseph Zappia, principal and co-chief investment officer at LVW Advisers”. “Prices went up much faster than earnings for a better part of that and now a lot of that money just has to come out of the system.”

Locally, the S&P/ASX 200 closed 0.8% lower on Thursday at 7175.9, turning negative for the week amid weakness in banking and tech stocks.

The benchmark index followed a negative lead set by US equities, which slipped amid concerns about the pace of interest-rate rises and their impact on the economy.

Banks--Westpac, NAB, Commonwealth, ANZ and Macquarie--fell by between 0.7% and 2.7%. Insurers and wealth managers also slipped.

WiseTech, Xero and Block gave up between 2.0% and 4.95% as the volatile tech sector fell by 2.5%.

Energy and utilities were the only two sectors to rise, gaining as Australia's energy market operator warned of tight gas supply.

Lithium miners Pilbara and Allkem dropped by 0.9 and 1.4%, respectively, following Wednesday's double-digit plunge in the formerly red-hot battery metals space.

In commodity markets, Brent crude oil rose 1.1% to US$117.61 a barrel as Saudi Arabia hinted it would make up supply shortfalls caused by Russian sanctions. Iron ore leapt 5.2% to US$143.65. Gold advanced 0.1% at US$1872.90.

Local bond markets continued to decline and the yield on Australian 2 Year government bonds climbed to 2.59% while the 10 Year advanced to 3.49%. Overseas, the yield on 2 year US Treasury notes edged lower to 2.63% and the yield on the 10 year US Treasury notes fell to 2.91%.

The Australian dollar traded at 72.63 US cents as of 7.00am, up from the previous close of 71.72 US cents. The Wall Street Journal Dollar Index, which tracks the US dollar against 16 other currencies declined to 94.48.

Asia

China stocks ended the session higher, after Chinese central bank officials reiterated a commitment to help shore up the country's economy and introduced a host of specific financing support measures for various sectors and companies. The Shanghai Composite Index rose 0.4% to settle at 3195.46, while the Shenzhen Composite Index advanced 0.7% to 2026.51. The tech-heavy ChiNext Price Index rose by the most, ending 1.2% higher at 2458.26. The auto sector, which has been at the center of the government's consumption stimulus policies, maintained recent momentum to lead gains.

Hong Kong's Hang Seng Index ended 1.0% lower at 21082.13, weighed by worries over a stronger greenback and elevated US Treasury yields. Investor sentiment was also pressured by news of more Covid-19 sub-variant cases in Hong Kong, as well as China's Caixin PMI reading Wednesday, which showed signs of more headwinds for the country's smaller manufacturers, IG market analyst Yeap Jun Rong says in a note. Pharmaceutical stocks led losses, with CSPC pharmaceutical slipping 5.2% and Sino Biopharmaceutical declining 4.1%. Shares of Chinese property developers Jiayuan International and Central China Real Estate rose 7.1% and 15% respectively, after announcing fundraising plans to pare down debt. The Hong Kong stock market will be closed Friday due to a public holiday.

Japanese stocks ended lower, dragged by falls in tech and pharmaceutical stocks, as concerns continued about higher cost of borrowing and materials. Fujitsu Ltd. dropped 4.4% and Astellas Pharma lost 4.1%. Meanwhile, Kansai Paint soared 10.5% following its plan to sell its Africa business. The Nikkei Stock Average fell 0.2% to close at 27413.88.

Europe

European stocks rose, with the pan-European Stoxx Europe 600 index up 0.6% in late trade, though trade is quiet with UK markets closed for a public holiday. Consumer goods and industrial stocks rose, though oil-linked stocks fell. French cognac maker Remy Cointreau added 4.1% after announcing a rise in fiscal 2022 earnings and strong 1Q sales, while construction firm Saint-Gobain advanced 4.8% following upbeat earnings guidance. However, concerns about high inflation and the prospect of interest-rate rises, both of which could weigh on economic growth, loom in investors' minds and limited gains. Germany's DAX rose 1% while France's CAC 40 added 1.3%. 

North America

Stocks rose, with all three major US indexes finishing Thursday on track to end the week in positive territory.

US indexes wavered in the morning before picking up steam. The benchmark S&P 500 gained 1.8%, while the tech-focused Nasdaq Composite added 2.7%. The Dow Jones Industrial Average rose 1.3%. Major stock indexes declined Wednesday to start the month.

Investors have struggled in recent months to assess how much and how quickly the Federal Reserve will boost interest rates in a quest to temper inflation. Some money managers worry that policy tightening could slow economic growth or even tip the US into a recession. Supply-chain disruptions exacerbated by the pandemic have been further hit by the war in Ukraine and China's zero-Covid strategy, lifting to the cost of energy, food and other commodities.

Some investors said they believed recent data suggests the US economy is softening and inflation is cooling, meaning the Fed might not need to act more aggressively than already planned. Federal Reserve Vice Chairwoman Lael Brainard on Thursday said half-percentage-point interest-rate increases would likely be appropriate at the Fed's next two meetings, but didn't commit to a slower path at subsequent meetings.

Ten of the S&P 500's 11 sectors rose Thursday, with the consumer discretionary, communication services and information technology sectors up at least 2.4%. Aoifinn Devitt, chief investment officer at Moneta, said consumer strength and declining stock valuations have helped the outlook for stocks, which have generally fallen in 2022.

"Word on the street is that this is a good entry point -- that equities have sold off so much they've been overdone," Ms. Devitt said. Her firm has added to its positions in assets that work as a hedge against rising inflation, including real estate and commodities.

Crude prices gained after the Organization of the Petroleum Exporting Countries and non-OPEC oil producers led by Russia agreed at a meeting Thursday to a bigger-than-expected oil-production increase. The US and Europe have pressed the group, dubbed OPEC+, to pump more crude, as Russia's invasion of Ukraine has sent oil prices soaring.

Futures for Brent crude, the global oil benchmark, ended Thursday up $1.32 a barrel, or 1.1%, to $117.61.

"The fear is that demand is still outstripping supply, and that supply increase doesn't make up for the difference," said Peter E. Klingelhofer, managing director, investment management at investment advisory firm Hamilton Capital in Columbus, Ohio. His firm is overweight on energy equities.

In bond markets, the yield on the benchmark 10-year US Treasury note declined to 2.914% Thursday, snapping a two-day winning streak. Yields and prices move inversely.

Stocks have fallen this year, and investors are looking for signs that the recent rout is over. Joseph Zappia, principal and co-chief investment officer at LVW Advisers, said he is watching for indications of seller exhaustion, including rallies on strong volumes and companies reporting bad news that doesn't drag the market down.

"Markets moved up too much too fast as a result of all the stimulus, liquidity and Covid-19. Prices went up much faster than earnings for a better part of that and now a lot of that money just has to come out of the system," Mr. Zappia said. His firm has rotated into defensive sectors, moving away from discretionary stocks.

Investors are monitoring data on the labour market. Fed Chairman Jerome Powell has expressed concern in recent months that the labour market is overheating. A tight labour market can add to inflation as competition for workers boosts wage-bargaining power.

The ADP employment report showed that the private sector added 128,000 jobs in May, lower than the 299,000 that economists surveyed by The Wall Street Journal had expected. Initial jobless claims dropped to 200,000 last week from the previous week's revised level of 211,000, the Labor Department said Thursday. The number is viewed as a proxy for layoffs.

"It's a very difficult environment. There are so many factors at play here, and the dynamics are very difficult to interpret," said Peter Garnry, head of equity strategy at Saxo Bank. "We think the Fed will have to be extremely aggressive to get inflation under control."

Microsoft shares recovered from early losses to finish up $2.16, or 0.8%, to $274.58, rising with the broader market. The software company cut sales and earnings guidance for the current quarter, citing the impact of foreign-exchange rates as the stronger US dollar takes a toll. Analysts said the news was the latest example of companies facing margin pressure from the dollar this year.

In other individual stocks, shares of Chewy rallied $5.69, or 24%, to $29.18 after the online pet-products retailer turned in a surprise profit and forecast a revenue range that was mostly above Wall Street estimates. MongoDB shares rose $44.89, or 19%, to $286.70 after the database company's results topped Wall Street estimates. Veeva Systems jumped $24.71, or 15%, to $192.55 after the after the cloud solutions company raised its full year guidance for sales.