Australia

Australian shares are set to fall after Wall Street slumped on renewed fears of an economic recession.

ASX futures were down 84 points or 1.3% at 6592 as of 8.00am on Wednesday, pointing to a fall at the open.

The Dow Jones Industrial Average dropped 1.6%. The blue-chip index was up as much as 1.4% earlier in the session. The S&P 500 closed down 2%, weighed by the consumer discretionary sector. Mega cap stocks Apple, Microsoft and Alphabet each shed at least 3%, taking the technology-focused Nasdaq Composite Index down 3%. Amazon.com fell 5.1%.

Stocks lost their early momentum Tuesday after data from the Conference Board showed consumers' short-term outlook for the US economy dropped sharply to its lowest point in nearly a decade. Consumer confidence also fell for a second consecutive month as Americans continue to assess the impact of high prices and rising rates.

Weak economic readings fuelled a stock market rally last week as investors hoped the Fed might slow its monetary-policy tightening, in a paradoxical outlook where bad news was good news. However, Tuesday's consumer reading is "bad news that's bad news," according to Mike Mullaney, director of global markets research at Boston Partners.

"If you have inflation expectations going up to the extent they are right now, it just means the Fed is going to be that much more aggressive in squashing inflation," he said.

Locally, the S&P/ASX 200 closed 0.9% higher at 6763.6, stitching together a fourth consecutive gain thanks to gains by commodity stocks.

Strong gains by shares of iron-ore miners, energy explorers and power retailers helped the benchmark index overcome a weak lead from US equities, which slipped slightly lower amid low volumes of trade.

Rio Tinto, Fortescue Metals and BHP put on between 3.0% and 4.3%, while Santos, Woodside and Beach gained between 2.7% and 7.0% as oil prices rebounded more than $US2 a barrel on the prospect of tight supplies as the Group of Seven nations proposed a price cap on Russian oil as part of new economic sanctions on Moscow. Refiner Ampol notched up gains of 2%.

Power retailers Origin and AGL rose 3.3% and 4.3%, respectively.

Major bank stocks pared strong week-opening gains, while the tech and consumer discretionary sectors fell.

In commodity markets, Brent crude oil added 2.7% to US$118.15. Iron ore rose 4.1% to US$124.80 as China eased travel quarantine in a relaxation of its zero covid policies. Gold futures were little changed at US$1821.70.

In local bond markets the yield on Australian 2 Year government bonds slipped to 2.73% while the 10 Year declined to 3.73%. Overseas, the yield on 2 Year US Treasury notes was down slightly to 3.11% and the yield on the 10 Year US Treasury notes edged lower to 3.17%.

The Australian dollar slipped to 69.06 US cents, down from 69.23 at the previous close. The Wall Street Journal Dollar Index, which tracks the US dollar against 16 other currencies jumped to 97.35.

Asia

Chinese shares ended higher after authorities said that they will ease quarantine requirements for international travellers entering the country, as part of efforts to balance their zero-Covid policy and rising economic pressures. The Shanghai Composite Index rose 0.9% to close at 3409.21, the Shenzhen Composite Index advanced 1.2% to 2243.92 and the ChiNext Price Index added 0.3% to 2840.42. Aviation stocks led the gains, with China Southern Airlines rising 4.1%, China Eastern Airlines adding 4.5% and Air China gaining 6.3%. Tourism-related stocks also gained. China Tourism Group Duty Free added 4.0% and Guilin Tourism advanced 6.9%.

Hong Kong stocks ended higher, as the market reversed losses in late afternoon trade. The upturn was particularly boosted by China's latest move to shorten the Covid-19 quarantine period for international travelers. The benchmark Hang Seng Index rose 0.9% to settle at 22418.97. Macau casino operators led gains. Sands China jumped 12%, while Galaxy Entertainment was up 7.9%. Restaurant companies further supported the market, as Haidilao surged 7.4% and Jimaojiu climbed 8.4%.

Japanese stocks ended higher, led by gains in auto and energy stocks as the yen's recent weakness raised hopes for earnings growth, offsetting concerns about higher operation costs. Nissan Motor gained 3.1% and oil explorer Inpex climbed 4.9%. The Nikkei Stock Average rose 0.7% to 27049.47. Investors are focused on the Group of Seven summit and its implications for global trade and commodity prices.

Europe

European stocks closed higher as news that China will ease coronavirus quarantine restrictions boosted market sentiment. The pan-European Stoxx Europe 600 rose 0.3%, the German DAX climbed 0.4% and the French CAC 40 added 0.6%. Energy stocks rose as oil prices rally after China's announcement.

"The crude demand outlook is getting a major boost after China cut the mandatory isolation time in half to seven days," Oanda analyst Edward Moya writes. "The easing of China's quarantine times could support the idea that Beijing might be getting closer to pivoting away from their zero-Covid policy, but that shift probably can't happen till closer to the end of the year”.

London’s FTSE 100 closed up 0.9% on Tuesday with early signs that the UK market is regaining its spark after a gloomy year-to-date for investors. Miners revved their engines on Monday following the G7's $600 billion infrastructure plan and were striking more gold Tuesday as investors continue to flock to the sector, AJ Bell investment director Russ Mould said in a research note.

"Perhaps helping the cause was news that China would reduce the Covid quarantine period for visitors from overseas, possibly a sign that the Asian superpower's extra tough pandemic measures might be relaxed going forward," Mr. Mould said.

North America

US stocks slumped Tuesday, giving up early gains and falling for a second consecutive day as investors parsed fresh economic figures for clues about the pace of monetary-policy tightening.

The Dow Jones Industrial Average dropped 1.6%. The blue-chip index was up as much as 1.4% earlier in the session. The S&P 500 closed down 2%. The technology-focused Nasdaq Composite Index fell 3%.

In recent sessions, the major indexes have been highly sensitive to news and data as investors assess the durability of markets' bounce from lows. The S&P 500 earlier this month fell into a bear market, or a 20% drop from a recent peak, amid the Federal Reserve's rate-increase campaign to tamp down historically high inflation.

Stocks lost their early momentum Tuesday after data from the Conference Board showed consumers' short-term outlook for the US economy dropped sharply to its lowest point in nearly a decade. Consumer confidence also fell for a second consecutive month as Americans continue to assess the impact of high prices and rising rates.

The sour report comes after consumer sentiment fell to its lowest point on record, according to the University of Michigan's gauge released Friday.

Weak economic readings fuelled a stock market rally last week as investors hoped the Fed might slow its monetary-policy tightening, in a paradoxical outlook where bad news was good news. However, Tuesday's consumer reading is "bad news that's bad news," according to Mike Mullaney, director of global markets research at Boston Partners.

"If you have inflation expectations going up to the extent they are right now, it just means the Fed is going to be that much more aggressive in squashing inflation," he said.

Volatility in markets, as evidenced by Tuesday's intraday reversal, could also be attributed to poor liquidity, said GenTrust's Jim Besaw. The chief investment officer said he has seen markets move more than expected when executing trades for clients because there are "not a lot of risk takers right now."

"Liquidity has been really poor for the last several months...and that exacerbates a lot," he said.

With the month and quarter coming to a close later this week, portfolio rebalancing could also impact market action, Mr. Besaw added.

The S&P 500 is on track for its worst first-half performance since 1970, down nearly 20% this year.

"The question is when we hit a market bottom and when we get that turning point, and it's not necessarily straight away," said Eloise Goulder, head of the global market, data and positioning intelligence teams in equity trading at JPMorgan Chase.

"For me to get bullish on [the second half of the year], we need to see the combination of inflation having peaked, and data having stabilized," she added.

Other data released Tuesday morning showed home-price growth cooled slightly in April. The S&P CoreLogic Case-Shiller National Home Price Index, which measures average home prices in major metropolitan areas across the country, rose at a slightly slower annualized pace in April compared with March. Earlier this month, mortgage rates reached the highest level in more than 13 years for two weeks in a row.

Oil prices climbed as investors digested what China's loosening of Covid-19 restrictions could mean for global economic growth. Brent crude, the international benchmark for oil prices, rose 2.5% to $117.98 a barrel.

Energy stocks comprised the only positive S&P 500 sector on Tuesday. Diamondback Energy added $5.41, or 4.3%, to $129.80. Occidental Petroleum advanced $2.81, or 4.8%, to $61.71 as a filing showed Warren Buffett's Berkshire Hathaway added to its holdings in the energy company, lifting its stake to 16%.

Travel stocks also got a lift following the news from China. Wynn Resorts gained $1.82, or 3.2%, to $59.51, and Las Vegas Sands rose $1.34, or 4%, to $34.51.

Consumer-discretionary stocks led the S&P 500 lower following the consumer-confidence reading. Nike was among the biggest laggards on the index, falling $7.72, or 7%, to $102.78 after the sneaker maker reported quarterly sales that were roughly flat and a decline in earnings.

Mega-cap technology stocks also sold off, dragging down the major indexes. Apple, Microsoft and Google parent Alphabet each shed at least 3%. Amazon.com fell $5.82, or 5.1%, to $107.40.

In the bond market, the yield on the benchmark 10-year US Treasury note advanced to 3.206% from 3.193% on Monday. Yields climb when bond prices fall.