Australia

Australian shares are sloping downward this morning following another disappointing day on Wall Street. The approaching deadline for US lawmakers to reach an agreement regarding the federal debt limit kept investors anxious. Meanwhile, Federal Reserve officials indicated the possibility for yet another interest rate hike.

ASX futures had slipped 0.7% or 48 points as of 6:00am on Thursday, suggesting a lower open.

US stocks extended declines Wednesday, reflecting rising anxieties about the debt ceiling as lawmakers continued negotiations to raise the borrowing limit.

The Dow Jones Industrial Average had a fourth-straight session of losses, declining 0.8%, while the S&P 500 dropped 0.7% and the Nasdaq Composite slid 0.6%.

Discussions over the debt ceiling have become a focus for investors in recent days. Stocks initially climbed last week after House Republican leaders and President Biden expressed optimism that they could reach an agreement. But a lack of progress in negotiations has weighed on the market with the two sides divided over how much the government should spend next year.

In commodity markets, Brent crude oil gained 1.5% to US$77.99 a barrel while gold dropped 0.8% to US$1,959.92.

Australian government bonds were slightly lower, with the 2 Year yield dipping to 3.50% and the 10 Year yield unchanged at 3.65%. Meanwhile, US Treasury notes leaped higher, with the 2 Year yield increasing to 4.36% and the 10 Year yield moving up to 3.73%.

The Australian dollar declined to 65.39 US cents from its previous close of 66.07. The Wall Street Journal Dollar Index, which tracks the US dollar against 16 other currencies, inched higher to 97.76.

Asia

Chinese shares ended lower with investor sentiment weighed by a weaker yuan versus the US dollar. Developers led losses with China Vanke falling 2.8% and Gemdale Corp. declining 3.4%. Talk of a potential local government debt default and its consequences for the banking system weighed on bank stocks. Industrial and Commercial Bank of China fell 3.45% and Bank of China declined 3.7%. The Shanghai Composite Index closed 1.3% lower at 3204.75, the Shenzhen Composite Index ended 0.5% lower while the ChiNext Price Index fell 0.4%.

Hong Kong shares closed lower, weighed by the yuan's weakness against the US dollar and talk of a potential debt default by local Chinese governments. The Hang Seng Index dropped 1.6% to 19115.93 as financials, tech companies and developers led the losses. CITIC Limited declined 5.7% and China Life Insurance dropped 2.8%. The Hang Seng Tech Index retreated 2.0% with Xiaomi Corp declining 3.4% and Baidu dropping 2.5%. The real estate sector slumped due to concerns that some cash-strapped property firms may be delisted on mainland markets. Longfor Group lost 7.9% and Agile Group dropped 4.7%. The Hang Seng Mainland Properties Index was 3.1% lower.

Japan's Nikkei Stock Average fell 0.9% to close at 30682.68. With the US Democratic and Republican parties getting increasingly entrenched, there is a rising fear of a possible miscalculation that leads to a technical default or creates a damaging situation for US fiscal credibility, Michael Hewson, chief market analyst at CMC Markets, said in an email. The worst performers on the Japanese index included Shiseido, which slipped 5.6%, Matsukiyo Cocokara, which lost 5.1%, and Oriental Land, which was 4.4% lower.

India's benchmark Sensex index declined 0.3% to 61773.78, tracking Wall Street losses overnight as negotiations over the US debt ceiling showed no signs of progress, which weighed on investor sentiment. Among the index's worst performers were Tata Motors, dropping 1.6%, ICICI Bank and HDFC Bank, down 1.3% each. Gainers included Sun Pharmaceutical Industries, up 2.0%, and Titan Co., 1.05% higher.

Europe

European stocks compounded earlier losses amid continued uncertainty over the US debt ceiling crisis. The pan-European Stoxx Europe 600 fell 1.9%, the French CAC 40 dropped 1.7% and the German DAX slipped 1.9%. Property and tech stocks were among the continent’s biggest fallers.

US lawmakers have yet to come to an agreement on the US debt ceiling, and negotiators Tuesday said no more meetings were planned, B. Riley Wealth said. "The stand-off is weighing on global stocks as investors seek haven assets," B. Riley Wealth chief market strategist, Art Hogan, wrote. "Our base case is that an agreement will be reached at the eleventh hour."

In London, the FTSE 100 closed down 1.8% to 7627 points amid a broader sell-off across global markets. UK inflation data came in above expectations, indicating further monetary tightening ahead, Interactive Investor head of investment Victoria Scholar noted. The UK consumer-price index (CPI) hit 8.7% in April, far above the central bank's 2% target, prompting gilt yields to jump across a range of maturities, Scholar explained.

"Housebuilders are under pressure, pricing in the prospect of further increases to mortgage costs," Scholar added. With the British index mostly in red, Prudential led the top fallers with a 5.9% slip, followed by Aviva and the home builder Persimmon, down 5.9% and 5.5%, respectively.

North America

US stocks extended declines Wednesday, reflecting rising anxieties about the debt ceiling as lawmakers continued negotiations to raise the borrowing limit.

The Dow Jones Industrial Average had a fourth-straight session of losses, declining 0.8%, while the S&P 500 dropped 0.7% and the Nasdaq Composite slid 0.6%.

Discussions over the debt ceiling have become a focus for investors in recent days. Stocks initially climbed last week after House Republican leaders and President Biden expressed optimism that they could reach an agreement. But a lack of progress in negotiations has weighed on the market with the two sides divided over how much the government should spend next year.

"This time a week ago, we were feeling pretty optimistic things would be solved, but the realization is: to make the sausage in Washington, it is messy," said Ryan Detrick, chief market strategist at Carson Group, a financial advisory firm.

Most investors still expect Congress will raise the debt ceiling by June 1, the day that Treasury Secretary Janet Yellen warned that the government may not have enough cash to pay all of its bills. Investors worry that a failure to raise the debt ceiling could cause serious economic damage, making it harder to own riskier assets.

Adding to the market's unease: a series of Federal Reserve officials have recently suggested in public appearances that an interest rate increase could remain on the table when the central bank meets next month. That possibility has helped push up US Treasury yields, which set a floor on borrowing costs across the economy.

Speaking Wednesday, Fed governor Christopher Waller said it is not yet clear what the Fed should do next month but that, whatever it does, officials would likely need to raise rates later in the year to fight inflation. Minutes from the Fed's May meeting released Wednesday showed officials were divided over whether additional increases were needed, though more favored a pause.

Few stocks were spared from Wednesday's price declines. Within the S&P 500, the information technology sector fell 0.6%, while materials dropped 1.1% and financials lost 1.3%.

Agilent Technologies fell roughly 6% after the maker of laboratory instruments reduced its outlook for the year.

Energy stocks were a bright spot, rising 0.5%, as a decline in US oil inventories helped lift US crude nearly 2% to $74.34 a barrel.

Some individual stocks also bucked the downward trend thanks to strong earnings reports. Among them were retailers Abercrombie & Fitch and Urban Outfitters, logging double-digit gains.