Australian shares are set to edge lower following a dip on Wall Street, as all eyes are on the US Federal Reserve’s response to tame inflation.

ASX futures were down 29 points or 0.4% at 6994 as of 7:00am on Monday, pointing to a slip at the open.

US stocks fell Friday, ending the week lower and snapping a four-week stretch of gains for the S&P 500, as investors second-guessed how aggressively the Federal Reserve will need to move to tame inflation.

The market endured a stretch of choppy moves as traders reassessed their bets on what the Fed might do at its September meeting. For weeks, many investors had been feeling confident that inflation had possibly peaked and that the central bank would soften the magnitude of its future interest-rate increases.

But comments in recent days from central bank officials, combined with the release of the minutes from the Fed's July meeting, put the possibility of continued aggressive rate increases back in focus. On Thursday, Federal Reserve Bank of St. Louis President James Bullard said he would lean toward a 0.75-percentage-point increase in September.

"This feels like a re-evaluation of whether there has been enough financial tightening," said John Roe, head of multiasset funds at Legal & General Investment Management. "And if there hasn't actually, could we get more pain from central banks having to do more?"
In commodity markets, Brent crude oil rose 0.13% to $US96.72 a barrel, gold edged down 0.66% to US$1,747.06

In local bond markets, the yield on Australian 2 Year government bonds rose to 2.84% while the 10 Year rose to 3.40%. Overseas, the yield on 2 Year US Treasury notes was at 3.23% and the yield on the 10 Year US Treasury notes rose to 2.99%.

The Australian dollar hit 68.76 US cents, flat from the previous close. The Wall Street Journal Dollar Index, which tracks the US dollar against 16 other currencies edged up to 99.52..


Chinese shares ended Friday lower amid worries about an unusual heatwave that prompted authorities to issue the first national drought alert of the year. "China is facing the most intense heat wave in six decades," Commerzbank analysts say in a note. They add that this could be "another piece of negative news that will hamper hopes of a swift recovery." The benchmark Shanghai Composite Index slipped 0.6% to 3258.08, the Shenzhen Composite dropped 1.3% to 2207.99 and the ChiNext Price Index fell 1.5% to 2734.22. Auto stocks were lower, with BYD Co. off by 2.0% and SAIC Motor slipping 0.6%. Stocks of utility companies rose, with Shanghai Electric Power jumping 10% and Zhejiang Zheneng Electric Power gaining 1.9%.

Hong Kong's Hang Seng Index edged 0.05% higher to close at 19773.03 as investors weighed mixed U.S. economic data against hawkish Fed officials' comments. Investors don't seem convinced by more potential aggressive tightening measures, Tina Teng, markets analyst at CMC Markets, says in an email. A 50bp or 75bp rate hike will probably mark a peak of the Fed's increase cycle, in turn pushing equity markets higher, Teng adds. The best performers on the HSI included Orient Overseas (International), up 6.5%, Country Garden adding 4.2% and Geely Automobile, which rose v3.6%. Meanwhile, NetEase fell 6.3% and Wuxi Biologics was down 4.9%. The Hang Seng Tech Index closed flat at 4192.31.

The Nikkei Stock Average closed flat at 28930.33 as falls in tech and pharmaceutical stocks offset gains in electronics and energy shares. Trend Micro fell 3.0% and Daiichi Sankyo dropped 2.9%, while Renesas Electronics gainede 2.4% and Idemitsu Kosan climbd 2.3%. Broader market index Topix rose 0.2% at 1994.52. Economic data and other policy-related developments are in focus ahead of Fed's Jackson Hole symposium next week.


The pan-European STOXX Europe 600 Index is down 3.51 points or 0.80% this week to 437.36, the German DAX is down 251.33 points or 1.82% this week to 13544.52, while the French CAC 40 Index is down 58.03 points or 0.89% this week to 6495.83.

In London, the FTSE 100 closed Friday up 0.11% as a collapse in the pound's strength helped avert a further drop in stock prices. The pound may have helped the FTSE 100 avoid the losses seen throughout Europe and the U.S., yet trouble lays ahead as consumer confidence hits a record low, IG Group PLC senior market analyst Joshua Mahony said in a note.

The resurgence in the dollar seen this week serves to highlight the growing feeling that we are on the cusp of another slump, as investors prepare to head for the exit doors once again," Mr. Mahoney said. The collapse in European currencies won't much help alleviate inflationary fears, with a weaker pound and euro meaning imports become increasingly more expensive, he said.

North America

The S&P 500 dropped 55.26 points, or 1.3%, to 4228.48 and fell 1.2% for the week. The Dow Jones Industrial Average fell 292.30 points, or 0.9%, to 33706.74 and lost 0.2% for the week. The Nasdaq Composite declined 260.13 points, or 2%, to 12705.22 and fell 2.6% for the week.

This week, central bankers will meet in Jackson Hole, Wyo., for the Federal Reserve Bank of Kansas City's annual economic policy symposium. Traders will be watching officials' speeches closely for insights on how the Fed is thinking.

Some of the market's biggest gainers over the past month were among its biggest losers Friday.

Shares of Bed Bath & Beyond dropped $7.52, or 41%, to $11.03, notching their biggest one-day loss ever, after billionaire activist investor Ryan Cohen sold his entire stake in the company.

Bed Bath & Beyond had enjoyed a spectacular run, rising 122% since the start of the quarter, thanks in part to soaring interest among retail investors. But Mr. Cohen's disclosure that he would sell his stake sparked a selloff midweek, threatening to unwind much of the gains investors had enjoyed in recent weeks.

Other meme stocks popular among retail investors also slid. GameStop lost $1.44, or 3.8%, to $36.49, and AMC Entertainment fell $1.27, or 6.6%, to $18.02.

Investors' broad retreat from risky assets also hit cryptocurrencies. The price of both bitcoin and ether fell from Thursday afternoon's levels.

The WSJ Dollar Index rose 0.5% Friday, on pace for its largest one-week percentage increase since March 2020, according to Dow Jones Market Data. Higher rates tend to bolster the greenback as yield-seeking investors pour more money into U.S. dollar-denominated securities.