Australia

Australian shares are set to rise after technology reversed some losses on Wall Street and the economic recovery trade stumbled as major US banks reported weaker earnings.

ASX futures were up 28 points or 0.4% at 7330 as of 7.30 am AEST, suggesting a positive start to trading.

The US stock market's winter selloff deepened last week, pushing all three major indexes further into the red for 2022.

Lacklustre earnings from some big US banks, along with weak retail sales and manufacturing data, sent most of the market lower again on Friday until a late-session buying rush pushed the S&P 500 and Nasdaq back into positive territory. The S&P 500 added 3.82 points, or less than 0.1%, and the Nasdaq gained 0.6%. The Dow fell 0.6%.

The S&P 500 and Dow Jones Industrial Average both fell a second straight week, while the Nasdaq Composite has been down the last three. Investors continued to sell bonds, pushing the yield on the benchmark 10-year US Treasury note up for a fourth straight week, notching its biggest rise over that stretch since mid-March.

Locally, the S&P/ASX 200 fell 1.1% to 7393.9 as broad-based losses pulled the benchmark lower for the week. Ten of 11 sectors finished in negative territory, as the ASX 200 continued its volatile start to 2022.

As in the US, tech stocks declined under pressure from government-bond yields. Afterpay shed 9.2% for its lowest close since early August 2020. The stock will be suspended from trade on 19 Jan ahead of the buy-now-pay-later provider's acquisition by Block.

The heavyweight financial sector lost 1.0%, with Pendal shedding 16% after saying its funds under management fell over the December quarter. The ASX 200 lost 0.8% over the week.

Even amid speculation that mortgage interest could rise quickly in 2022, demand for housing remains robust, according to ABS data released Friday. New mortgage loan approvals rose 6.3% on month in November, well above expectations of a 0.4% increase.

Capital Economics said Friday it expects the Reserve Bank to exit it's asset purchase program, known as quantitative easing (QE), in February, with the first rate hike in 2023. 

Overseas, the pan-continental Stoxx Europe 600 fell 1%. South Korea's central bank raised interest rates to pre-pandemic levels to fight inflation, and signalled that more increases could come this year. The country's benchmark Kospi index declined 1.4%. Other major Asian stock indexes also closed lower. China's Shanghai Composite fell 1%, and Japan's Nikkei 225 shed 1.3%.

Turning to commodities, gold futures slipped 0.3% to $US1816.50 an ounce; Brent crude gained 1.9% to $US86.06 a barrel; Iron ore fell 0.9% to US$126.75 a tonne.

In bond markets the yield on the Australian 10-year bond edged down to 1.85%, while the US 10-year Treasury yield jumped to 1.78% amid renewed selling. Yields increase as prices fall.

The Australian dollar was buying 72.06 US cents near 8.00am AEST, down from the previous close of 72.79. The WSJ Dollar Index, which measures the US dollar against 16 other currencies, rose to 89.19.

Asia

Chinese shares closed the day mixed, despite data showing China's 2021 trade surplus hit a record. The ongoing global recovery will likely continue to underpin demand for Chinese exports, CBA said, though it expects export growth to ease to single digits from recent highs. Consumer stocks were broadly lower. Liquor maker Kweichow Moutai declined 0.6% and dairy company Inner Mongolia Yili Industrial Group fell 0.4%. Tsingtao Brewery advanced 1.1% after saying it expects 2021 net profit to rise 43%. The Shanghai Composite Index slid 1.0%, the Shenzhen Composite Index ended flat and the ChiNext Price Index rose 1.2%.

Hong Kong's Hang Seng Index closed 0.2% lower, weighed by a selloff in tech shares after Chinese internet stocks fell sharply overnight in the US ADR market. Meituan declined 2.5%, Alibaba Group lost 2.2% and JD.com slipped 2.1%. Among other stocks, sports brand Li Ning shed 3.3% and ENN Energy lost 1.4%. China Cinda Asset Management slid 9.9% after it said it would scrap an agreement to purchase a 20% stake in a consumer finance unit of Ant Group.

Japanese stocks ended lower, dragged by falls in electronics and real-estate stocks as the yen strengthened amid uncertainty over the Omicron variant. Fanuc fell 5.1% and property developer Mitsui Fudosan dropped 2.9%. Investors are focusing on US economics data and the implication they will have on Fed policy.

Europe

European stocks fell as US equities trade mostly lower after some poorly received US bank earnings, weak US retail sales data and Federal Reserve officials supporting the case for raising interest rates. The pan-European Stoxx Europe 600 dropped 1%, falling a similar amount for the week.

"It's been another choppy week for European equity markets with weakness in US equity markets bleeding into a negative end to the week, as speculation about the pace of US rate rises keeps investors on edge," CMC Markets analyst Michael Hewson says.

In London, the FTSE 100 declined 0.3% on Friday and posted a 0.7% gain for the week.

North America

The stock market's winter selloff deepened this week, pushing all three major indexes further into the red for 2022.

The S&P 500 and Dow Jones Industrial Average both fell a second straight week, while the Nasdaq Composite has been down the last three. Investors continued to sell bonds, pushing the yield on the benchmark 10-year US Treasury note up for a fourth straight week, notching its biggest rise over that stretch since mid-March.

Investors were still assessing the outlook for interest rates and how fast the Federal Reserve will move to tame inflation, roiling the stock and bond markets. At the same time, a rise in Covid-19 cases has weighed on sentiment, although there are signs that infections may be nearing a peak.

The week started on shaky footing, with stocks broadly falling and the Nasdaq nearing a correction before closing slightly higher. On Tuesday, Fed Chairman Jerome Powell reaffirmed the central bank's view that inflation will likely peak by the middle of the year, while also suggesting interest rates will remain low. That helped halt a streak of declines for the S&P 500 and Dow industrials.

Stocks, especially hard-hit sectors such as tech, appeared to regain some ground. But new pricing data released Wednesday and Thursday showed inflation remained hot last month, complicating the outlook. Stocks dropped Thursday, led by a 2.5% slide in the Nasdaq.

Lacklustre earnings from some big US banks, along with weak retail sales and manufacturing data, sent most of the market lower again on Friday until a late-session buying rush pushed the S&P 500 and Nasdaq back into positive territory. The S&P 500 added 3.82 points, or less than 0.1%, and the Nasdaq gained 0.6%. The Dow fell 0.6%.

"We expect a more volatile environment, with big up days and big down days. Perception of inflation will be a driving force in the direction of the market," said David Donabedian, chief investment officer of CIBC Private Wealth US, adding that "it will be a bumpy ride."

The late Friday turnaround wasn't enough to avert another down week. The S&P 500 and Nasdaq ended up falling 0.3% over the last five trading days, while the Dow shed 0.9%. Markets are closed Monday for Martin Luther King Jr. Day, shortening next week's trading schedule.

On Friday, the first dose of fourth-quarter corporate earnings reports gave investors a sobering outlook on corporate growth this year. Quarterly profits fell by double-digit percentages at JPMorgan Chase and Citigroup, ending a hot streak of big gains for most of 2021.

Shares of Shares of JPMorgan Chase slid $10.34, or 6.1%, to $157.89, and Citigroup dropped 85 cents, or 1.3%, to $66.93. Wells Fargo bucked the trend, adding $2.06, or 3.7%, to $58.06, after the bank reported that profit soared 86% in the final three months of 2021.

BlackRock posted higher quarterly profit, and market gains lifted the investment firm's assets under management above $10 trillion. Despite that, its shares declined $18.98, or 2.2%, to $848.60.

Still, analysts remain upbeat on corporate profits, predicting growth across the S&P 500. Mark Haefele, chief investment officer at UBS Global Wealth Management, said he expects another positive quarter, with earnings growth of 30% over the prior year.

Manufacturers, material firms and consumer discretionary stocks were also down following the economic data. Besides that, Sherwin-Williams declined $8.93, or 2.8%, to $308.46 after the paint maker lowered its guidance, citing a shortage of raw materials amid supply-chain and labour constraints.

Some buying of large-cap growth stocks gave the market, and the Nasdaq, some support, as investors returned to a trade that tends to work well during periods of economic uncertainty. Facebook parent Meta Platforms, Microsoft, Tesla and Netflix all gained more than 1%.

Energy stocks jumped 2.4%, getting a boost from a climb in oil prices.

Casino stocks including Las Vegas Sands and Wynn Resorts jumped after Macau released a draft law that would cut the tenure for new casino licenses in half, but wouldn't reduce the number of licenses. Las Vegas Sands added $5.33, or 14%, to $42.99, and Wynn Resorts gained $7.24, or 8.6%, to $91.47.

Meanwhile, bond yields resumed their climb. Expectations for an interest-rate rise as soon as March have caused some investors to sell government bonds, pushing up yields. The yield on the benchmark 10-year Treasury note ticked up to 1.771% Friday, from 1.708% Thursday.

"Equity markets will continue to take their cues from the bond market," said Hugh Gimber, a strategist at J.P. Morgan Asset Management. "What's becoming clear is the Fed is realizing that inflationary pressures are larger and more broad-based than they previously expected."

Cryptocurrency dogecoin jumped 12% from its 5pm New York level Thursday after Elon Musk said Tesla was accepting payment for some merchandise with the currency, which was originally started as a joke. Bitcoin was recently down less than 1%.