Australia

Australian shares are poised to fall after Wall Street staged a V-shaped recovery and clawed back massive intra-day losses to finish higher in a tumultuous trading session.

ASX futures were down 102 points or 1.4% at 6950 near 8.00 am AEST, suggesting a negative start to trading.

The Dow Industrials, S&P 500 and Nasdaq Composite all finished the day higher after falling sharply in morning trading, a wild close to a volatile day in US stocks.

By the end of the day, the Dow had added 101 points, or 0.3% after being down more than 1000 points in the morning. The S&P 500 also added 0.3%. Popular technology stocks were among the hardest hit early on, but they too rallied. The tech-heavy Nasdaq index closed about 0.6% higher after trading more than 4% lower earlier in the session.

Investors are bracing for a Federal Reserve meeting this week in which the central bank is expected to shed more light on its plans to combat surging inflation. The market has also been spooked by mounting tensions between the West and Russia over the military buildup on the border with Ukraine.

Locally, the S&P/ASX 200 closed 0.5% lower at 7139.5, with all but three sectors finishing in the red. Property trusts rose the most, putting on 1.4%, while the technology sector had the biggest fall, losing 1.6%.

Regis Resources was the day's biggest loser, falling 14% on its expectations of lower gold output and higher operating costs after a wall slip at its Rosemont mine.

South 32 slipped 3.7% after it revised FY guidance for Cannington and Australia Manganese, while Orica gained 2.7%.

Australia's big banks also took a hit, with CBA the only major lender to finish in the green, up 0.1%. Macquarie fell 0.4%, while AMP lost 2.2% after getting a rating downgrade from Citi.

Overseas, European markets fell. The pan-continental Stoxx Europe 600 tumbled 3.8%, its worst one-day percentage drop in since June 2020, dragged down by shares of travel, leisure, and basic-resource companies. Asian markets were mixed. Hong Kong's Hang Seng fell 1.2%, while the Shanghai Composite Index was flat and Japan's Nikkei 225 rose 0.2%.

Turning to commodities, gold futures rose 0.5% to $US1843.30 an ounce; Brent crude fell 1.2% to $US86.80; Iron ore declined 2.7% to US$133.70 a tonne.

In bond markets, the yield on the Australian 10-year bond increased to 1.93%, while the benchmark US 10-year Treasury yield rose to 1.77%. Yields fall when prices rise.

The Australian dollar was buying 71.42 US cents near 8.00am AEST, down from the previous close of 71.81. The WSJ Dollar Index, which measures the US dollar against 16 other currencies, edged up to 89.72.

Asia

Chinese stocks ended higher, supported by sharp gains in lithium producers amid rising prices of the key ingredient for electric-vehicle batteries. Ganfeng Lithium surged 10% and Tianqi Lithium advanced 7.4%, while battery maker CATL added 2.0%. China Tourism Group Duty Free gained 3.3% after preliminary 2021 results showed a 56% rise in net profit. Liquor makers and transport stocks declined. Kweichow Moutai lost 1.8% and Wuliangye Yibin dropped 1.0%, while Air China lost 2.1% and logistics company S.F. Holding shed 3.1%. The Shanghai Composite Index ended flat, the Shenzhen Composite Index added 0.2% and the ChiNext Price Index was 0.7% higher.

Hong Kong's Hang Seng Index closed 1.2% lower, weighed by risk-off sentiment in global markets ahead of the FOMC meeting later this week. Tech stocks led losses. Netease fell 7.5%, Alibaba Group lost 6.3% and JD.com slipped 5.6%. Shanghai Fosun Pharmaceutical fell 5.2% after it recently entered into a deal to sublicense Merck's molnupiravir, an investigational oral medication for Covid-19 treatment. It has yet to receive any purchase order for molnupiravir. Cathay Pacific ended flat after saying it expects to post a narrower net loss for 2021.

Japanese stocks ended higher following recent sell-offs caused by concerns about Federal Reserve tightening. Energy, shipping and bank stocks lead gains. Oil explorer Inpex climbed 4.6%, major shipper Mitsui O.S.K. Lines gained 3.9% and Mizuho Financial Group added 2.1%. The Nikkei Stock Average rose 0.2%. Investors are focusing on any policy-related developments ahead of a two-day US central bank policy meeting starting Tuesday, as well as Covid-19 infection trends in Japan.

Europe

European stocks slide in closing trade as the prospect of a Russian attack on Ukraine weighs on market sentiment. The pan-European Stoxx 600 declined 3.8%, its biggest one-day decline since June 2020.

"The escalating drumbeat of conflict risk in Ukraine has seen European equity markets fall back sharply today, as the UK followed the US in announcing that it was removing non-essential embassy staff from Kyiv as concerns increased that a conflict was getting closer," CMC Markets analyst Michael Hewson says. These worries are overshadowing Wednesday's Federal Reserve meeting, which should see the central bank confirm expectations for an interest rate rise in March, he says."

In London, the FTSE 100 slid for a third consecutive day on Monday, falling 2.6% as investors continued to cut back on their exposure to equities ahead of the Federal Reserve's meeting on Tuesday and Wednesday.

"The rush for the exits continues across stock markets, as investors renew their selling of equities, marking one of the most dramatic starts to the year that we have seen since 2018," IG Group chief market analyst Chris Beauchamp said. Investors should expect more volatility this week with more losses likely in store until the Federal Open Market Committee meeting is out of the way and the Fed's current stance becomes clearer, Mr. Beauchamp said.

North America

The Dow industrials, S&P 500 and Nasdaq Composite all finished the day higher after falling sharply in morning trading, a wild close to a volatile day in US stocks.

By the end of the day, the Dow had added 101 points, or 0.3% after being down more than 1000 points in the morning. The S&P 500 also added 0.3%. Popular technology stocks were among the hardest hit early on, but they too rallied. The tech-heavy Nasdaq index closed about 0.6% higher after trading more than 4% lower earlier in the session.

The market slide extended to the cryptocurrency markets, with bitcoin dipping at one point below $33,000, less than half the market value of its November high.

Investors are bracing for a Federal Reserve meeting this week in which the central bank is expected to shed more light on its plans to combat surging inflation. The market has also been spooked by mounting tensions between the West and Russia over the military buildup on the border with Ukraine.

At its lowest point on Monday, the broad S&P index was in correction territory, defined as a 10% drop from a recent high. It ended the day around 8% from its record three weeks ago.

Tesla, a favourite of many investors, slid 1.5%. Chip maker Nvidia, one of last year's strongest performers, was roughly flat.

Vaccine maker Moderna slid 1.7%. Airbnb tumbled 5.6%. Netflix shares dropped 2.6%, adding to their losses after the streaming company warned last week of slowing subscriber growth.

Stocks coasted higher for much of the past year, repeatedly smashing records as investors treated every short-lived dip as a buying opportunity. But that mentality has shifted in 2022 as the rally lost one of its biggest friends: the Fed keeping interest rates at rock-bottom levels during the pandemic to juice economic activity.

Now, investors expect the Fed to raise interest rates several times in 2022 to curb inflation, which is running at its fastest pace in 40 years.

"The buy-the-dip mentality has left the market at this juncture," said Michael Mullaney, director of global markets research at Boston Partners. "If you've tried to buy this dip, you've gotten toasted."

The Fed is set to gather for a two-day meeting Tuesday. At its conclusion on Wednesday, Chairman Jerome Powell is expected to signal that rates will likely rise as soon as March.

"The Fed was way behind the curve on inflation," said Lisa Shalett, chief investment officer of Morgan Stanley Wealth Management. She expects the Fed to hike interest rates four times in 2022 and to start shrinking its bond holdings as it seeks to get a grip on inflation.

Though painful for investors, this year's selloff is to be expected given the shift towards higher rates, Ms. Shalett added, noting that the S&P 500 enjoyed double-digit returns during the past two years amid ultra-loose monetary policy.

"It's been an unbelievable run," she said. "This is a standard, garden-variety correction, and it's absolutely appropriate when there is a change in policy."

The yield on 10-year Treasury notes fell to 1.735% from 1.747% Friday as investors ran to the safety of government bonds. Yields move in the opposite direction from prices.

The Fed's policy shift has punished speculative bets such as tech stocks and crypto. Rising interest rates encourage investors to move money into safer assets such as bonds, and they reduce the value of expected future cash flows from fast-growing companies, hurting their share prices.

So-called meme stocks popular with individual investors took a beating. GameStop fell 5.8%, while AMC Entertainment dropped 7.4%. Both stocks have lost more than 30% of their value since the beginning of the year.

Bitcoin was recently trading at $36,215, up 2.3% from its price at 5 pm New York on Sunday but down more than 20% since the start of the year.

Fears of a possible Russian invasion of Ukraine are weighing on markets, analysts said. The State Department on Sunday instructed the families of US diplomats in Ukraine to leave the country, while the White House is considering sending several thousand troops to Europe.

War in Ukraine and its possible consequences—including the potential closure of the US financial system to Russian banks—could play out in markets in unpredictable ways, said Sebastien Galy, senior macro strategist at Nordea Asset Management.

"The closer you get to the cliff, the more nervous [the market] is," Mr. Galy said. "We don't have the information to trade."

The Russian ruble fell 1.6% against the dollar and was recently trading at about 78.8 rubles to the dollar.

One of the bright spots in the US stock market was Kohl's, which jumped 36% after a group backed by activist hedge fund Starboard Value offered roughly $9 billion to buy the department store chain.

Investors are looking ahead to a fresh batch of corporate earnings reports this week, including from some big tech companies. International Business Machines is due to report quarterly results after the closing bell on Monday, followed by General Electric, Microsoft, Apple and Tesla later in the week. Of the 65 companies in the S&P 500 that filed results through midday Monday, nearly 77% beat analysts' expectations, according to Refinitiv.

Oil prices were caught up in Monday's selloff. Brent crude futures, the benchmark in international energy markets, fell 1.2% to settle at $86.80 a barrel.