Australia

Australian shares are set to extend Friday’s losses into the new week after Wall Street ended mixed amid deepening fear of a recession.

ASX futures were down 19 points or 0.3% at 6345 as of 8.00am on Monday, pointing to muted selling at the open.

Overseas, the S&P 500 rose 0.2%, while the Nasdaq Composite gained 1.4%. The Dow fell 0.1%. All three finished the week with sharp losses. The S&P 500 fell 5.8% for the week, its largest decline since the Covid pandemic roiled markets in March 2020. The Dow fell 4.8% for the week, its biggest drop since October 2020.

Markets of all stripes are facing a reckoning. Decades-high inflation is roiling consumers, and investors are wondering if central banks might act too aggressively to fight it and end up tipping the economy into recession. The US Federal Reserve signalled this week that it would continue lifting rates at the most rapid pace in decades, which could further weigh on stocks.

"The big question is, 'Will the Fed tighten so much as to cause a recession?' That's what the stock market is trying to discount," said Jay Willoughby, chief investment officer at TIFF Investment Management.

Locally, the S&P/ASX 200 tumbled 1.8% to 6474.8, completing its worst week since the early days of the Covid-19 pandemic.

The ASX 200 fell 6.6% over the four-session week. It hadn't lost as much in a week since March 2020. The benchmark's sixth consecutive daily loss marked its longest losing streak since February 2020.

Ten of 11 sectors lost ground on Friday, with materials, tech and the financials worst hit. The heavyweight financial sector, which comprises more than 25% of the ASX 200 by market capitalization, gave up 2.2%.

Banks--Westpac, ANZ, NAB and Commonwealth--fell between 0.7% and 3.6% amid fears of recession in Australia and globally.

In commodity markets, Brent crude oil fell 5.6% to US$113.12 a barrel. Iron ore slid 5.7% to US$122.15. Gold lost 0.5% to US$1840.60.

Long bond markets declined on Friday and the yield on Australian 2 Year government bonds rose to 3.27% while the 10 Year jumped back above 4% to 4.13%. In the US, the yield on 2 year Treasury notes gained to 3.18% and the yield on the 10 year US Treasury notes edged lower to 3.23% as fears of an economic slowdown sent investors into long-dated bonds.

The Australian dollar declined to 69.33 US cents, down from 70.43 at the previous close. The Wall Street Journal Dollar Index, which tracks the US dollar against 16 other currencies rose to 97.34.

Asia

Chinese stocks rose, with gains led by renewables, nonferrous metals and liquor makers. A shares and yuan assets have become a relative haven amid rising volatility elsewhere, Central China Securities says in a note. New Covid-19 cases in Shanghai and nationwide have been under control, allowing a faster resumption of work and production across the country, it adds. Kweichow Moutai rose 3.9%, battery maker CATL gained 5.6% and Ganfeng Lithium advanced 6.2%. The Shanghai Composite Index added 1.0% to 3316.79, taking weekly gains to 1.0%. The Shenzhen Composite Index climbed 1.2% and the ChiNext Price Index was 2.8% higher.

Hong Kong stocks ended the session higher, as the market recovered from a selloff on Thursday. The Hang Seng Index rose 1.1% to settle at 21075.00. Chinese tech giants rebounded to lead gains on the index. JD.com surged 6.1% amid upbeat expectations for its upcoming 618 promotional sales. Citi analysts earlier this week raised its forecast for the Chinese e-commerce company's expected gross merchandise value during the upcoming annual shopping festival, citing likely strong demand for home appliances and smartphones, product categories that JD specializes in. Meituan added 5.2% and Alibaba Health rose 5.1%.

Japan's Nikkei Stock Average fell 1.8% to close at 25963.00. The Nikkei's losses narrowed slightly after the BOJ maintained its ultra-accommodative policy, which confirmed that it won't join the Fed and other major central banks in tightening policy. Worst performers on the Nikkei included Lasertec slipping 8.2%, Hoya dropping 6.2% and Recruit Holdings closing 5.8% lower. Meanwhile, Pan Pacific International added 3.3% and Osaka Gas gained 2.8%.

Europe

European markets traded mixed as investors stayed cautious amid uncertainty about the economic outlook. The pan-European Stoxx Europe 600 rose 0.1%, the French CAC 40 edges 0.1% lower and the German DAX gained 0.7%.

"Fresh tightening from central banks, the ongoing withdrawal of stimulus and general caution about the outlook continues to drive investors out of stocks, with no sign of a summer bottom," IG analyst Chris Beauchamp writes.

London’s FTSE 100 closed down 0.4% Friday as a slide in commodities weighed on the index. London saw the price of copper slide to its "lowest levels this year, and oil prices on course for their first negative week since early May," Michael Hewson, chief market analyst at CMC Markets UK, said in a note.

Earlier in the session, mining company Glencore helped the index after forecasting interim profits at its trading division achieving the top end of its outlook range. Sage Group was the day's biggest riser, up 5.6%, followed by Ocado Group, up 5.5%, and Intermediate Capital Group, up 4%. BP, Rio Tinto, and Shell were the day's biggest fallers, down 6.2%, 4.9% and 4.7%, respectively.

North America

The S&P 500 and Dow Jones Industrial Average on Friday wrapped up their worst weeks since 2020, with the major indexes extending whipsaw moves that have injected fresh volatility into markets.

The S&P 500 rose 0.2%, while the Nasdaq Composite gained 1.4%. The Dow fell 0.1%. All three finished the week with sharp losses. The S&P 500 fell 5.8% for the week, its largest decline since the Covid pandemic roiled markets in March 2020. The Dow fell 4.8% for the week, its biggest drop since October 2020.

The once-hot crypto market also had a crazy week, reinforcing investors' concerns that there is nowhere to hide from the current market turmoil. One of the largest crypto lending platforms, Celsius Network LLC, told customers on Sunday it was pausing all withdrawals. The anxiety spread quickly throughout the sector all week. Companies like Coinbase announced big layoffs and prices for bitcoin and other cryptocurrencies tumbled.

Markets of all stripes are facing a reckoning. Decades-high inflation is roiling consumers, and investors are wondering if central banks like the Federal Reserve might act too aggressively to fight it and end up tipping the economy into recession. The Fed signalled this week that it would continue lifting rates at the most rapid pace in decades, which could further weigh on stocks.

The S&P 500 entered a bear market on Monday and continued falling Tuesday. Stocks rallied Wednesday after the Fed announced its biggest interest-rate increase since 1994, then reversed course Thursday as investors digested the reality of continued inflation.

"The big question is, 'Will the Fed tighten so much as to cause a recession?' That's what the stock market is trying to discount," said Jay Willoughby, chief investment officer at TIFF Investment Management.

All 11 sectors within the S&P 500 have fallen at least 15% from their recent highs, with seven in bear market territory. Friday's winners were communication services and consumer discretionary, while energy and utilities lagged behind.

The recent rate increases reverse a prior cycle of loosening monetary policy that allowed prices for both stocks and bonds to rally in recent years. Prospects for repeated rate rises throughout the rest of the year have lent to fears that rapid tightening could reduce growth. US mortgage rates recently reached their highest level in more than 13 years. Recent economic data have shown sharp declines in key sectors.

Hani Redha, a portfolio manager at PineBridge Investments, said it is possible that inflation could still climb further in the coming months as energy prices remain elevated.

"The central banks, who have been our friends for a very long time, are telling us we should expect pain," Mr. Redha said. "That inflation number is the only thing that matters right now. Even if we see growth slowing a lot, that will not be enough to cause the Fed to change course."

Tech stocks rose. Twitter added 42 cents, or 1.1%, to $37.78; Meta Platforms gained $2.87, or 1.8%, to $163.74; and Microsoft advanced $2.68, or 1.1%, to $247.65.

"Are we just facing a profit recession or an ongoing economic recession? And that's still uncertain," said Michelle Cluver, associate portfolio strategist at Global X.

Brent crude, the international benchmark for oil prices, fell $6.69, or 5.6%, to $113.12 a barrel. European natural-gas prices rose 5.4% Friday, putting them up 51% for the week. Moscow's move to slash natural-gas exports to Europe this week has pitched the continent's energy crisis into a dangerous new phase that threatens to drain vital fuel supplies and kneecap the continent's economy. In US trading, Diamondback Energy, Devon Energy and ConocoPhillips all fell more than 8%.

Signs remained that investors sought assets viewed as safe, such as the US dollar and US government bonds. The WSJ Dollar Index, which measures the greenback against a basket of 16 currencies, rose 0.9%. In bond markets, the yield on the benchmark 10-year Treasury ticked down to 3.238%. Yields fall as prices rise.

"We are closer to a bottom," said Josh Emanuel, chief investment officer of Wilshire Funds Management. He said that equity and bonds markets have already priced in most of the economic and earnings risk. Mr. Emanuel's firm has reduced exposure to long-duration bonds and favored value equities recently.

The dollar value of bitcoin showed tepid signs of stabilizing on Friday before declining sharply over the weekend and falling below US$20,000 for the first time since 2020.