Australia

Australian shares are poised to slip in line with Wall Street where investors ditched bonds and technology stocks amid a second day of hawkish signals from the US Federal Reserve.

ASX futures were down 21 points or 0.3% at 7434 as of 8.00am on Thursday, suggesting a negative start to the day.

US stocks fell on Wednesday morning, rose ahead of the afternoon release of the minutes from the Fed's mid-March meeting, then dropped again. The technology-focused Nasdaq Composite Index dropped 2.2%. The S&P 500 lost 1%, while the blue-chip Dow Jones Industrial Average fell 0.4%.

The breakneck equity rally that took hold in mid-March is losing steam this month as interest rate worries grip markets. Federal Reserve Governor Lael Brainard, a noted dove, said on Tuesday the central bank is strongly committed to curtailing inflation this year. A day later, minutes from the Fed’s March meeting revealed accelerated plans to slim the Fed’s $9 trillion asset portfolio. Officials also discussed multiple 0.5% rate hikes this year should inflation stay high.

"Today is massive de-risking" as money managers raise cash in a highly uncertain global economy, said Aidan Whitehead, head of equity trading at JMP Securities. "The uncertainty is driving the volatility, and there's so much of it, particularly when it comes to rates."

Locally, the S&P/ASX 200 closed 0.5% lower at 7490.1 as a tech selloff dragged down the market in the wake of Tuesday's gains.

Tech stocks lost 2.9%, while the materials sector fell 1.5%. Novonix dropped 6.9%, Block lost 6.9% and Life360 shed 5.3%.

Virtus Health, which said earlier that it would consider a takeover offer from BGH, rose 1.0%.

The market's strongest performer for the day was Whitehaven Coal, which rose 5.5%, while Polynovo and AMP each gained 4.6%.

In commodity markets, iron ore lose 0.4% to $US160.20 per tonne; gold futures rose 0.2% to $1,927.50; Brent Crude fell 5.2% to US$101.07 a barrel.

US bonds dipped lower for a fourth day as investors digested March’s Federal Reserve meeting minutes. The US 10-Year Treasury Note yield rose to 2.60%. The yield on the Australian 10-year bond rose to 2.93%. Yields rise when prices fall.

The Australian dollar slipped amid renewed strength from the USD. It was buying 75.07 US cents as of 8.00am on Thursday, down from the previous close of 75.10. The WSJ Dollar Index, which measures the US dollar against 16 other currencies, rose to 92.06.

Asia

Chinese stocks ended mixed in a muted session, as the market resumed trading after a two-day holiday. The benchmark Shanghai Composite Index edged up 0.7 points to settle at 3283.43, while the Shenzhen Composite Index was up 0.14 point at 2127.96. The ChiNext Price Index fell 1.2%. Bohai Securities points out that volatility remains in the A-share market as new Covid-19 infections continue to rise in the country. But it reckons further downside is limited, as valuations are already likely at their bottom.

Hong Kong stocks ended the session lower, as losses deepened in late-afternoon trade after Hong Kong's No. 2 official, John Lee, formally resigned, taking the pro-Beijing politician a step closer to running in the city's chief executive election next month. The benchmark Hang Seng Index fell 1.9%, dragged by tech stocks, especially electronics makers. Lenovo fell 6.9% and Sunny Optical was down by 6.3%. Exporter Techtronic Industries further weighed on the market, with a 7.4% slump.

Japanese shares ended lower, dragged by declines in electronics and shipping stocks, as concerns grew about the Fed's pace of tightening and higher borrowing costs. Denso lost 4.9% and major shipper Nippon Yusen dropped 5.2%. The yield on the 10-year Japanese government bond rose 2.5 basis points to 0.235%. The Nikkei Stock Average fell 1.6%. Investors' focus remained on the war in Ukraine and its impact on trade.

Europe

European stocks closed lower as investors reacted to news of fresh western sanctions against Russia and hawkish remarks from Federal Reserve officials. The pan-European Stoxx Europe 600 dropped 1.5%, the German DAX slipped 1.9% and the French CAC 40 shed 2.2%. London’s FTSE 100 lost 0.3%.

Following the slide in US markets yesterday after remarks from Fed officials Lael Brainard and Mary Daly about ramping up efforts to tame inflation, the market tone has soured significantly with European stocks sinking as the "mood music over more onerous sanctions on Russia ratchets up further in anticipation of that we could well see evidence of further Russian atrocities in the coming days," CMC Markets analyst Michael Hewson says in a research note.

Data on the UK construction sector helped some construction companies in the country, with Berkely Group closing up 2.1% at 3,947 pence and Barratt Developments up 2.1% at 530.40 pence.

North America

Bond yields hit their highest level in three years and technology stocks lost ground as investors digested more details about the Federal Reserve's plan to raise interest rates.

Stocks fell Wednesday morning, rose ahead of the afternoon release of the minutes from the Fed's mid-March meeting, then dropped again. The technology-focused Nasdaq Composite Index dropped 2.2%. The S&P 500 lost 1%, while the blue-chip Dow Jones Industrial Average fell 0.4%.

Government bonds kept selling off Wednesday, with yields rising for a fourth straight session, on the prospect of further rate increases by the Fed, after the worst quarter for US bonds in more than 40 years.

The yield on the benchmark 10-year note rose 0.05 point to 2.606%, the highest level since March 2019, from 2.554% Tuesday. Yields and bond prices move in opposite directions.

The Fed raised interest rates in March for the first time since 2018. Minutes from that meeting showed that central-bank officials last month considered raising rates by a half-percentage point but decided on a quarter-point increase in light of the uncertainty surrounding Russia's invasion of Ukraine.

"Many participants noted that one or more [half-percentage-point] increases in the target range could be appropriate at future meetings, particularly if inflation pressures remained elevated or intensified," the minutes said.

On Tuesday, the S&P 500 fell 1.3% after Fed governor Lael Brainard said the central bank was strongly committed to curbing inflation. The comments by Ms. Brainard, who last year advocated sticking with easy-money policies, bolstered expectations the Fed will reduce its $9 trillion asset portfolio alongside rate increases. Fed officials were nearing agreement on a plan to reduce their bondholdings, the March minutes said.

"After Brainard's comments yesterday, the market was bracing for more bad news from the Fed's minutes," said Joe Saluzzi, co-head of equity trading at Themis Trading. "However, it looks like the minutes pretty much were in line with her comments about how the balance-sheet reduction will be implemented. "

The prospect of higher rates and a smaller Fed balance sheet has buffeted global markets that had benefited from two years of easy monetary policy by the Fed and other major central banks. Expectations of higher short-term rates have hit the mortgage market, sending the average 30-year fixed-rate mortgage to 4.9% last week, the highest rate since 2018, according to the Mortgage Bankers Association.

That has rocked shares of home builders, which fell Wednesday across the board, the losses accelerating after the release of the Fed minutes. PulteGroup fell $1.15, or 2.7%, to close at $40.75, Lennar was down $3.42, or 4.3%, to $75.45, and D.R. Horton slid 2.92, or 3.9%, to $71.13. The SPDR S&P Homebuilders exchange-traded fund, off 2.3% Wednesday, has lost nearly 30% this year, according to FactSet.

"Today is massive de-risking" as money managers raise cash in a highly uncertain global economy, said Aidan Whitehead, head of equity trading at JMP Securities. "The uncertainty is driving the volatility, and there's so much of it, particularly when it comes to rates."

He said big investors are largely sitting on the sidelines ahead of earnings season, which will provide indicators about which sectors of the economy are still growing amid a broad slowdown in the US, Europe and Asia. Matthew Luzzetti, Deutsche Bank's chief US economist, said in a report Tuesday that aggressive tightening by the Fed "will push the economy into a recession."

"It is very clear to everyone [the Fed is] going to engineer a rapid tightening cycle," said Samy Chaar, chief economist at Lombard Odier. "It is possible that the Fed engineers a soft landing, but it would be quite miraculous," he added, referring to a situation in which the central bank brings inflation under control without pushing the US economy into recession.

Twitter slipped 0.4%, or $0.21, to close at $50.77. Shares of the social-media company rose this week after filings showed Tesla Chief Executive Elon Musk had amassed a big stake. Twitter said Tuesday Mr. Musk would join the board. Tesla shares dropped 4.2%, or $45.40, to close at $1045.76. Chip maker Nvidia fell 5.9%, or $15.24, to $244.07.

Rivian Automotive shares, after rising in early trading after the electric-vehicle maker reported first-quarter production and deliveries that it said were in line with its forecasts, dropped 5%, or $2.09, to $40.10.

Retailer Walmart closed up $2.52, or 2.3%, to $154.99, a new high and its first record close since November 3030.

The war in Europe is adding to unease among investors. The Ukraine conflict -- and sanctions imposed on Russia by the West -- threaten to drive up commodity prices, adding to the inflationary pressures prompting central banks to raise rates. The European Union is taking steps to reduce its energy imports from Russia, but has yet to sanction the purchase of oil and natural gas.

Treasury Secretary Janet Yellen, in testimony before the House Financial Services Committee, warned that Russia's invasion "will have enormous economic repercussions in Ukraine and beyond." Disruptions in food supplies from the war will affect "million of people around the world," she said.

In commodities, Brent-crude futures fell $5.57, or 5.2%, to $101.07 a barrel. Brent has fallen in six of the last eight sessions. US allies said they would release close to 60 million additional barrels of oil from their reserves in a continuing bid to tame prices.

Record Covid-19 cases in China are adding to concerns about global supply chains and growth in China, one of the world's biggest economic engines. Key manufacturing indexes in China recently hit their lowest levels since the February 2020 Covid-19 shock, according to ABN-AMRO Senior Economist Arjen van Dijkhuizen.

"With lockdowns in large cities such as Shanghai continuing, we expect these drags to remain visible in April, and perhaps longer," he wrote in a Wednesday note. "The Chinese leadership has repeatedly stressed the need for vigilance on the pandemic front."