Australia

Australian shares are poised to rise as Wall Street slumps ahead of the start of US reporting season.

ASX futures were up 18 points or 0.3% at 6521 as of 8.00am on Tuesday, pointing to a positive open.

Overseas, all three major US indexes opened lower, regained some ground and then lost steam into the close. The S&P 500 fell 1.2%. The blue-chip Dow Jones Industrial Average lost 0.5%. The Nasdaq Composite Index shed 2.3%, as technology stocks lost ground.

Investors are awaiting corporate earnings reports for indications of how much higher prices and weaker consumer sentiment have eroded companies' profits. Americans expect lower inflation increases over the longer run, a new Federal Reserve Bank of New York report said.

"We're in a backdrop where central banks are going to continue raising interest rates and the underlying market narrative continues to be one of potentially rising recession risks. We're going to see markets react to different data points, react to earnings," said Laura Cooper, a macro strategist at BlackRock, who said she doesn't advise that investors "buy the dip" at present. "That sets us up for quite a volatile period ahead."

Locally, the S&P/ASX 200 closed 1.1% lower at 6602.2, pulling back at the start of the week amid losses by materials, tech, consumer and financial stocks.

The benchmark index fell steadily through the session, having gained 2.1% across last week. EML Payments shed 25% following the sudden exit of its CEO, making it the worst-performing ASX 200 component and helping pull the tech sector down by 2.5%.

Gold, iron-ore and lithium stocks all lost ground, while weakness in wealth managers, health insurers and banks more than offset gains by general insurers in the financial sector.

Only the health sector rose, edging up 0.1%.

In commodity markets, Iron ore fell 4.8% to US$107.45, Brent crude oil lost 0.6% to US$106.41, while gold declined 0.6% to US$1731.70.

In local bond markets, the yield on Australian 2 Year government bonds increased for a third day to 2.56% while the 10 Year gained to 3.50%. Overseas, the yield on 2 Year US Treasury notes slipped to 3.07% and the yield on the 10 Year US Treasury notes edged down to 2.99%.

The Australian dollar fell 1.8% to 67.35 US cents as of 6.46am AEST. The Wall Street Journal Dollar Index, which tracks the US dollar against 16 other currencies rose to 99.82.

Asia

Chinese stocks finished lower, weighed by miners and automakers. A flare-up in Covid-19 cases in China has again hit a nerve in the market and threatens to snap a trend of recovering consumption, Shanxi Securities says in a note. Great Wall Motor fell 5.0% after its June vehicle sales data underperformed the overall market, while SAIC Motor shed 6.1%. Tianqi Lithium slumped 9.2% and Ganfeng Lithium slid 6.7%. Among gainers were electric utility companies, with China Yangtze Power gaining 2.0% and China Three Gorges Renewables 3.4% higher. The Shanghai Composite Index declined 1.3% to 3313.58, the Shenzhen Composite Index shed 1.5% and the ChiNext Price Index was 1.8% lower.

Hong Kong shares closed higher, with the benchmark Hang Seng Index posted its biggest percentage loss in about a month, losing 2.8% to 21124.20, amid worries over rising Covid-19 cases and ensuing lockdowns in China. Macau casino stocks took a beating, following city officials' move to shut gaming venues for a week to curb the spread of the virus, with Sands China down 8.1% and Galaxy Entertainment 4.9% lower. The tech sector weakened after internet companies like Alibaba Group and Tencent Holdings were fined for failing to make proper antitrust declarations. Alibaba shed 5.8% and Tencent declined 2.9%. Ronshine China slumped 11% after missing interest payments on two bonds.

Japanese stocks end higher broadly as the ruling coalition's election victory in Japan solidified the current government's standing and has raised the prospects for policy continuity. Among the biggest winners, Daiichi Sankyo gains 4.4%, Suntory Beverage & Food climbs 3.7% and Sumitomo Realty & Development adds 3.7%. The Nikkei Stock Average rises 1.1% at 26812.30. USD/JPY is at 137.00 after rising to 137.28 earlier, the highest level since September 1998, compared with 136.09 late Friday in New York. Any developments over economic policies are in focus following the elections and the death of former Prime Minister Shinzo Abe.

Europe

European stocks closed mostly lower as worries over soaring natural-gas prices and fresh China coronavirus restrictions weighed. The pan-European Stoxx Europe 600 drops 0.5%, the German DAX slumps 1.4%, the French CAC 40 sheds 0.6%. "Not unexpectedly the DAX has led in terms of the losses, given the effects higher energy prices could have on its manufacturing base heading into the second half of the year," CMC Markets analyst Michael Hewson writes.

Sinch shares plunge 28% after a short-selling research firm alleged the Swedish telecommunications group overstated its results. Uniper, Germany's biggest gas importer, dives 14% amid a dispute between Germany and Uniper's Finnish parent Fortum over the cost of rescuing the utility.

London’s FTSE 100 closed Monday up 0.01%, outperforming other global markets on a strong performance from utilities. Indices have broadly struggled at the start of the week amid a rising dollar and fears of a recession creeping back in, IG Group PLC chief market analyst Chris Beauchamp says in a research note.


"But while the FTSE 100's mining contingent is still sharply down on the day, the losses in London have been trimmed thanks to a strong performance from the utilities on hopes that the rise in gas prices will bolster their bottom line, even if they take a hit from opportunistic politicians looking for headlines," Mr. Beauchamp says.

North America

US stocks fell to start the week as investors prepared for fresh inflation data and corporate earnings that could influence the Federal Reserve's path for interest-rate increases.

All three major indexes opened lower, regained some ground and then lost steam into the close. The S&P 500 fell 1.2%. The blue-chip Dow Jones Industrial Average lost 0.5%. The Nasdaq Composite Index shed 2.3%, as technology stocks lost ground.

Stocks had lately staged a recovery, with the S&P 500 rising nearly 2% last week. The rally cooled on Friday after a stronger-than-expected jobs report showed the labour market is still hot, raising the probability that the Federal Reserve could continue with aggressive interest rate increases and potentially cause a recession. The next key data release, the US consumer-price index for June, is on Wednesday.

"The market's fear is that the Federal Reserve has to keep pushing and cause a deeper recession," said Brent Schutte, chief investment officer for Northwestern Mutual Wealth Management. "I think you're already seeing inflation measures roll over, which I think is good news -- that if we can alleviate these recession fears, we'll eventually push the market higher."

Investors also are awaiting corporate earnings reports for indications of how much higher prices and weaker consumer sentiment have eroded companies' profits. Americans expect lower inflation increases over the longer run, a new Federal Reserve Bank of New York report said.

"We're in a backdrop where central banks are going to continue raising interest rates and the underlying market narrative continues to be one of potentially rising recession risks. We're going to see markets react to different data points, react to earnings," said Laura Cooper, a macro strategist at BlackRock, who said she doesn't advise that investors "buy the dip" at present. "That sets us up for quite a volatile period ahead."

John Lynch, chief investment officer for Comerica Wealth Management, said his firm, which shifted its holdings toward value stocks late last year, will revisit its investments toward the end of this month.

"I don't think there's an appreciation that if we have a mild, self-fulfilling recession in the first half of this year, we still are going to have an 8% print on inflation, and the Fed's going to have to keep raising" rates, he said.

Major financial firms including JPMorgan Chase and Morgan Stanley are scheduled to report earnings on Thursday, followed by BlackRock, Citigroup and Wells Fargo on Friday. The KBW Nasdaq Bank Index fell about 0.9% on Monday.

Many household-name firms are also set to post earnings this week, including PepsiCo on Tuesday and Delta Air Lines on Wednesday.

"These are going to be huge bellwethers on consumer confidence, on spending. The guidance will be really important -- these guys have incredible insight about how the consumer is behaving and how they expect this to evolve over the rest of the year," said Fahad Kamal, chief investment officer at Kleinwort Hambros.

Twitter slid $4.16, or 11%, to $32.65. Elon Musk filed a statement on Friday evening saying he was terminating his $44 billion bid for the social-media company and that Twitter had violated the merger agreement. Twitter also put out a statement indicating it would sue Mr. Musk.

Other tech stocks fell, with Facebook parent Meta Platforms finishing down 4.7% and Netflix off 5.2%. Shares of Broadcom declined $15.83, or 3.2%, to $482.86 after the microchip company announced that the president of its software business was departing.

Bond markets continued to flash a warning sign. The US yield curve remained inverted, with yields on shorter-dated bonds above those of longer-dated debt. The yield on the benchmark 10-year Treasury note edged down to 2.990% from 3.098% on Friday. The two-year Treasury yield dipped to 3.068%. Yields fall when prices rise.

Oil prices extended their decline. Brent, the global benchmark for crude, retreated less than 0.1% to settle at $107.10 a barrel. It fell more than 4% last week.

It is about "the concern that we are going to see a sharp decline in demand on the back of the deteriorating growth backdrop," said Ms. Cooper, of BlackRock. "That's notably playing out in the commodity space."