Australia

Australian shares are poised to open higher after US stocks rallied and bonds slumped as investors weighed a strong start to US reporting season against hawkish comments from Federal Reserve officials. Oil retreats and iron ore dips below US$150.

ASX futures were up 47 points or 0.6% at 7581 as of 8.00am on Wednesday, suggesting a positive start to the trading day.

Overnight, the S&P 500 advanced 1.6%. The Dow Jones Industrial Average added 1.5%. The tech-heavy Nasdaq Composite gained 2.2%. It was the best day in a month for all three indexes. The gains were broad-based, with 10 of the S&P 500's 11 sectors advancing. Only the energy group, the top-performing sector this year, declined in line with oil prices.

US first quarter earnings season is in full swing and early signs point to resilient earnings growth amid rising inflation and soaring energy prices. Of the 48 companies reported, 79% had positive surprises, according to Bloomberg.

"Any signs that we're seeing corporate America able to navigate through that environment and still grow profits is a very, very positive driver for equities over the balance of the year," said Craig Fehr, investment strategist at Edward Jones.

Streaming giant Netflix tumbled 25% in after-market trading after reporting its first loss of subscribers in a decade. It expects further losses next quarter.

The bond market selloff picked up speed overnight after comments from Fed officials added to expectations of aggressive rate hikes. Chicago Fed president Charles Evan said rates could be between 2.25 and 2.5% by year end and may need to go higher if inflation continues. St Louis Fed president James Bullard flagged the possibility of a 0.75% hike, the first since 1994.

Bonds across the spectrum sold off. The US 10 Year Treasury note rose to 2.94%, while the 2 Year jumped to 2.59%.

The International Monetary Fund cut its outlook for global growth for 2022 by 0.8% to 3.6% on Tuesday, citing Russia’s invasion of Ukraine.

Locally, the S&P/ASX 200 closed 0.6% higher at 7565.2 on Tuesday amid gains by large-cap companies.

The benchmark index reopened from a four-day holiday weekend and shrugged off a weak lead from US equities, which closed modestly lower, to record a second straight gain.

The heavyweight financial and materials sectors both posted solid gains as minutes from the RBA's April board meeting were widely seen as reinforcing market expectations that the central bank will raise interest rates in June.

Major banks Commonwealth Bank, Westpac, ANZ and NAB put on between 0.5% and 1.2%.

Private equity firm KKR has made an $88 per share offer for Ramsay Healthcare, Australia’s largest private hospital operator, valuing the company at more than $20 billion. The offer is a 37% premium over Ramsay’s last close of $64.39.

Miners Fortescue, BHP and Rio Tinto gained between 0.6% and 1.3%.

In commodity markets, iron ore lost 2.6% to US149.85 per tonne; gold futures fell 1.4% to $1,959.00; Brent crude oil retreated 4.9% to US$ 107.59.

In local bond markets, the yield on the Australian 10 Year bond leapt back above 3% to 3.06% as minutes from the Reserve Bank’s March meeting were seen to confirm market expectations of a June rate hike.

The Australian dollar was buying 73.75 US cents as of 7.00am, up from the previous close of 73.46. The WSJ Dollar Index, which measures the US dollar against 16 other currencies, moved up to 93.42.

Asia

Chinese stocks ended the session lower, extending yesterday's muted trading as the market remained under pressure amid rising concerns over an economic slowdown in 2Q. The benchmark Shanghai Composite Index inched down 1.49 points to settle at 3194.03, while the Shenzhen Composite Index was 0.1% lower at 2020.28. The tech-heavy ChiNext Price Index suffered the biggest drop, losing 1.4% to end at 2453.55. Consumer goods companies such as cosmetics makers, home appliance sellers and furniture firms led the downturn. Chip makers and electronics suppliers further weighed, as the sector weakened after its gains on Monday.

Hong Kong stocks fell sharply after returning from a long holiday weekend, with the benchmark Hang Seng Index shedding 2.3% to close at 21027.76. KGI Securities in a research note attributes the weakness to the recent sluggish A share performance, China's soft economic data for 1Q despite better-than-expected GDP growth, as well as rising US Treasury yields, which tend to draw funding away from Asian equities. China Merchants Bank led losses on the index with an 11% drop after its board voted to remove its president. Sportswear makers Li Ning and Anta dropped 7.3% and 5.2%, respectively, after the latter posted disappointing 1Q sales figures. Tech companies also weighed on the market, with Alibaba Health losing 6.0% and Meituan falling 5.9%.

Japanese stocks end higher, led by gains in electronics and auto stocks, as the USD/JPY hits a new 20-year high. Lasertec climbs 5.3% and Nissan Motor gains 3.9%. The Nikkei Stock Average rises 0.7% to 26985.09. USD/JPY is at 128.19 after rising to 128.23 earlier, its highest level since May 2002, compared with 126.99 as of Monday 5 pm New York Time. Investors remain focused on yen movements, ahead of the earnings season set to start later this week.

Europe

European stocks fell in closing trade amid growing calls for the EU to impose an embargo on Russian energy supplies in response to its invasion of Ukraine.

The pan-European Stoxx Europe 600 dropped 0.8%, the FTSE 100 declined 0.2%, the German DAX shed 0.1% and the French CAC 40 slipped 0.8%.

Fears over the economic impact of a potential EU ban on Russian energy have pushed European equities lower, IG analyst Chris Beauchamp says in a note. "While the calls to cut off Russian supplies are understandable, it boosts the already not-insubstantial risk of a recession in the near future, reducing the limited attractiveness of Europe yet further."

London’s FTSE 100 index dropped 0.2%, or 12 points to 7603 as caution reigns after mixed trading in Asia and a lower close on Wall Street Monday.

"A volatile US trading session largely came to nothing, with the main indices ending fractionally lower on the back of the usual suspects," Richard Hunter at Interactive Investor says. "With first-quarter earnings season now accelerating, investors are still keenly watching for the effects of the Omicron variant, the Russia-Ukraine conflict and spiralling inflation on global growth."

A broad range of stocks fall, led by the likes of Polymetal International, Reckitt Benckiser, Carnival and Diageo, though gains for oil, mining and financial stocks limit overall losses

North America

US stocks and government bond yields rose Tuesday as investors parsed the latest round of earnings reports for signs that corporate profits are holding up despite inflation.

Analysts expect profits from big US companies to keep growing this year even as costs rise. That has bolstered the bull case for equities at a time when investors are anxious over the Federal Reserve's plans to raise interest rates to fight inflation.

The S&P 500 advanced 1.6%. The Dow Jones Industrial Average added 1.5%. The tech-heavy Nasdaq Composite gained 2.2%. It was the best day in a month for all three indexes.

The gains were broad-based, with 10 of the S&P 500's 11 sectors advancing. Only the energy group, the top-performing sector this year, declined.

Companies have been showing they can deliver earnings growth even as investors worry about tightening monetary policy, said Craig Fehr, investment strategist at Edward Jones.

"Any signs that we're seeing corporate America able to navigate through that environment and still grow profits is a very, very positive driver for equities over the balance of the year," he said.

Travel stocks were among the day's strong performers after a federal judge threw out the requirement that travelers in the US wear masks on airplanes and other forms of mass transit. American Airlines Group shares rose $1.05, or 5.7%, to $19.59. Las Vegas Sands shares gained $1.59, or 4.3%, to $38.24. Carnival shares added 87 cents, or 4.6%, to $19.91.

The market is in the thick of earnings season with dozens of big US companies expected to report this week. Given high inflation, investors are watching for signs of which firms are able to preserve their profits by passing higher costs along to customers through price increases.

Shares of Johnson & Johnson gained $5.42, or 3.1%, to $183.08 after the pharmaceutical firm beat earnings expectations. Travelers fell $9.06, or 4.9%, to $176.16 despite reporting higher earnings and lifting its dividend.

Netflix shares fell 23% in after-hours trading as the streaming giant said it lost subscribers globally in the first quarter and expects to lose more this spring.

In bond markets, the yield on the 10-year US Treasury note kept climbing. The yield on the benchmark bond rose to 2.911%, the highest settlement since December 2018, from 2.861% on Monday.

Bond yields rise as prices fall, and investors have been selling bonds on expectations of high inflation and interest-rate increases from the Federal Reserve.

"Fixed income has been a particular point of pain. This is the worst bear market in bonds we've seen in a generation," said Brian O'Reilly, head of market strategy at Mediolanum International Funds.

Concerns about inflation -- which has soared to multidecade highs -- and how central banks might respond have dominated investors' thinking for months, but so far corporate profits have held up as firms have largely managed to pass higher costs on to consumers. Investors say they are expecting earnings growth to moderate this quarter as it becomes harder for companies to continue raising prices.

"The longer prices stay high, the longer the war in Ukraine continues, the higher likelihood that something has to give. Corporations cannot continue to pass on input costs forever," said Mr. O'Reilly. "There has to be a tipping point."

Other stock movers included shares of American Campus Communities, which jumped $7.22, or 13%, to $64.80 after The Wall Street Journal reported that Blackstone is buying the student-housing owner in a deal valued at $12.8 billion.

Plug Power shares rose $2.50, or 9.8%, to $28.05 after the alternative-energy company said it had struck a deal with Walmart to supply the retailer with hydrogen.

In commodity markets, Brent crude, the international oil benchmark, fell 5.2% to $107.25 a barrel. Natural gas fell 8.2%, continuing a volatile stretch for the fuel. Gold prices declined 1.4%.