Australia

Australian shares are set to fall as economically sensitive commodities from copper to oil dropped amid growing recession fears.

ASX futures were down 64 points or 0.98% at 6477 as of 8.00am on Wednesday, pointing to drop at the open.

US markets closed mixed. The S&P 500 rose 0.2% on Tuesday to start the trading week after the US stock and bond markets closed for the Independence Day holiday. The blue-chip Dow Jones Industrial Average lost 0.4%. The tech-focused Nasdaq Composite Index shed earlier losses to gain 1.7%.

Equity prices declined for much of Tuesday morning before rallying back in afternoon trading. The S&P and Dow Jones Industrial Average fell as low as 2.2% and 2.4%, respectively.

Brent crude, the international oil benchmark, slid 9.5% to US$102.77 a barrel. That is down from more than US$120 a barrel a month ago and the largest single-day declines since March. Demand for fuel typically falls alongside declines in economic growth as consumers travel and purchase less.

Copper, widely considered an economic bellwether, fell to the lowest price in 19 months.

"Oil prices are starting to reflect a much greater recession risk," said Matt Miskin, co-chief investment strategist at John Hancock Investment Management.

Locally, the S&P/ASX 200 closed 0.25% higher at 6629.3 as the Reserve Bank raised interest rates and reaffirmed its intention to reduce inflation.

The Reserve Bank delivered its second consecutive 50-basis-point interest-rate rise, as widely anticipated by economists. The bank said further action to rein in prices was likely.

Gold, energy and tech stocks led gains as the benchmark index moved 1.4% ahead so far this week.

Regis Resources led gold miners higher, surging 11% after beating 4Q production expectations.

Shares in Santos, Beach and Woodside added between 0.4% and 3.8% as the energy sector put on 2.2% amid higher oil prices.

Brainchip and Life360 each added 11% as beaten-down tech stocks rallied.

In commodity markets, Iron ore rose 4% to US$114.30 while spot gold lost 2.3% to US$1766.07.

Local bond markets were little changed following the Reserve Bank’s widely expected 0.5% rate hike. The yield on Australian 2 Year government bonds edged up to 2.43% while the 10 Year declined to 3.54%. Overseas, the yield on 2 Year US Treasury notes slipped to 2.82% and the yield on the 10 Year US Treasury notes lost ground to 2.81%.

The Australian dollar slipped to 67.94 US cents, down from 68.63 at the previous close. The Wall Street Journal Dollar Index, which tracks the US dollar against 16 other currencies jumped to 98.69.

Asia

China stocks ended the session lower, as the market extended a rangebound trading pattern in recent sessions amid weak investor sentiment in global equities. The benchmark Shanghai Composite Index edged down 1.40 points to settle at 3404.03, while the Shenzhen Composite Index fell 0.5% to 2232.98. The tech-heavy ChiNext Price Index lost 0.3% to end at 2825.13. Consumer goods and services companies led the downturn, as the sectors retreated from recent gains that had been driven by Beijing's stimulus measures such as vouchers and tax cuts.

Hong Kong shares closed a tad lower, with the benchmark Hang Seng Index slipping 0.1% to 21830.35 as Hong Kong stocks closed slightly higher, with the benchmark Hang Seng Index up 0.1% at 21853.07. Sentiment was supported by gains in US equities futures, mainly on hopes the US will scrap China tariffs, SPI Asset Management managing partner Stephen Innes said in a note. However, recession fears are still present, which could limit investor appetite for riskier assets, Innes said. Gains were broad-based, led by Wuxi Biologics, rising 6.5%, followed by Alibaba Health Information Technology, which gained 4.7% and Anta Sports Products, which advanced 2.6%.

Japanese stocks ended higher, led by gains in tech stocks following their recent drops caused partly by concerns about higher borrowing costs and the economic outlook. M3 gained 3.8% and MonotaRO climbed 3.7%. The Nikkei Stock Average rose 1.0% to close at 26423.47. Investors were focusing on any policy-related developments ahead of Japan's upper-house election on Sunday.

Europe

European markets slumped as economic and inflation concerns spooked investors on both sides of the Atlantic.

The pan-European Stoxx Europe 600, French CAC 40 and German DAX all closed more than 2% lower as US traders return after the Independence Day holiday. Brent crude falls 9% to $102.94 a barrel and precious and base-metal prices are firmly in negative territory.

"This recurrence of selling has put indices across the board into the red, as growth and inflation fears return right on cue," IG analyst Chris Beauchamp says. "Oil and mining stocks have gone deep into the red, a situation replicated on Wall Street too."

London’s FTSE 100 plunged Tuesday as oil and mining stocks dived. This caused the commodity-heavy UK index to close 2.9% lower, its worst session since 16 June. On the energy side, Shell plummeted 8.5% and peer BP fell 7.0%. The FTSE 100's worst performer was Harbour Energy, the smaller, UK-focused oil-and-gas producer. Its shares dropped 9.6%.

Miners didn't do much better, with Anglo American shares declining 8.3% and Glencore down 8.0%, while Rio Tinto fell 4.0%. "Previously high-flying UK energy and mining stocks, from Shell and BP to Glencore and Anglo American, are in the cross-hairs today as recession fears undermine future demand for commodities, notwithstanding the reopening of China," Ben Laidler from eToro told Dow Jones Newswires.

North America

Two of the three major US stock indexes closed higher after the market staged a late-day rally, while oil prices fell on investor concerns that slowing economic growth could curb energy consumption.

The S&P 500 rose 0.2% on Tuesday to start the trading week after the US stock and bond markets closed for the Independence Day holiday. The Dow Jones Industrial Average lost 0.4%. The tech-focused Nasdaq Composite Index shed earlier losses to gain 1.7%.

Equity prices declined for much of Tuesday morning before rallying back in afternoon trading. The S&P and Dow Jones Industrial Average fell as low as 2.2% and 2.4%, respectively.

Brent crude, the international oil benchmark, slid 9.5%, or $10.73, to $102.77 a barrel. That is down from more than $120 a barrel a month ago. West Texas Intermediate, the US standard, fell more than 8%, or $8.93, to $99.50, its first time settling below $100 since May. Both commodities recorded their largest single-day declines since March. Demand for fuel typically falls alongside declines in economic growth as consumers travel and purchase less.

"Oil prices are starting to reflect a much greater recession risk," said Matt Miskin, co-chief investment strategist at John Hancock Investment Management.

Oil prices rose through late spring this year as the fallout from Russia's invasion of Ukraine weighed on global supply. Prices have been less volatile in recent months but remain above the roughly $80 where they began the year.

US stocks tend to perform well in July, history shows, but this year investors say they are bracing for more pain ahead. Traders are focused on stubborn inflation that has forced central banks around the world to aggressively tighten monetary policy. Economic data showing declines in metrics ranging from factory output to retail spending have exacerbated concerns that the US economy could tumble into a recession.

Gold prices fell 1.9%, while the WSJ Dollar Index, which measures the greenback against a basket of 16 currencies, advanced about 1%.

The euro, in contrast, slipped about 1.5%, falling to a nearly 20-year low on concerns that the eurozone may be nearing an energy shock that could tip the bloc into recession. The euro recently traded at $1.0266, putting it within striking distance of reaching parity.

Early Tuesday, reports that President Biden is expected to roll back some tariffs on Chinese imports initially provided stocks some reprieve, sending futures higher in premarket trading on hopes that the changes could help rein in inflation. But as the session continued, selling pressure deepened.

"The market is desperate for good news," said Florian Ielpo, head of macro at Lombard Odier Investment Managers. Even with the possibility of a rollback of tariffs on the horizon, he said, investors are asking how it might address mounting recession fears and inflation.

Elsewhere in markets, volatility was widespread. European gas prices rose to the highest level since March as oil workers in Norway went on strike, reducing output from Europe's second-biggest gas supplier after Russia at a time when energy markets are already squeezed.

"The energy shock that the US is getting is significantly less than in Europe," said Marco Pirondini, head of US equities at Amundi US, an asset-management company.

In the bond market, meanwhile, the yield on the benchmark 10-year US Treasury note fell to 2.808%, from 2.901% Friday.

Investors this week are awaiting the Friday release of the June jobs report, which will shed insight on the trajectory of the US economy. So far, the job market has shown little sign of faltering this year -- offering one encouraging sign for the economy -- even as other data in recent weeks have pointed to an economic slowdown.

Investors could be disappointed this month when major companies begin reporting second-quarter results.

"The first shoe that dropped was the Fed trying to get control over inflation," said Cliff Corso, president and chief investment officer at Advisors Asset Management. "The second shoe and the challenge for the second half is earnings, which haven't really been adjusted down to coincide with a slowing [gross domestic product] forecast."

Money managers and strategists also will be monitoring developments surrounding the Biden administration's plans for tariffs and what impact it could have on inflation and the economy. On Tuesday, Chinese Vice Premier Liu He and US Treasury Secretary Janet Yellen spoke by videoconference about topics including the tariffs, marking the first time the two policy makers have spoken since October 2021.

Economists say removing Chinese tariffs isn't likely to have a dramatic impact on inflation. And any rollback may not mark a fundamental change in the US-China relationship or the countries' economic outlooks, some investors said.

"The size of the tariff reduction may not fundamentally change the US inflation or China export outlooks," said Frank Benzimra, head of Asia equity strategy at Société Générale. Investors might be focused on other tensions between the two countries, such as export and investment restrictions, he added.

Gains in the S&P's communications services, consumer discretionary and information technology sectors pushed the broad-market index into the green for the day. The energy sector recorded the largest decline of any sector, down about 4%.

Shares of Ford Motor Co. fell 1.1%, or 12 cents, to $11.20 after the company reported a 27% decrease in sales in June compared with the same month last year. Tesla shares rose 2.5%, or $17.41, to $699.20. The electric-car maker said Saturday that its vehicle deliveries fell quarter over quarter for the first time in more than two years after the company had to temporarily shut down its largest factory, in Shanghai, because of local Covid-19 restrictions.