Australia

Australian shares were flat this morning following declines in nearly all global markets on Tuesday. Asian stocks fell after China reported a drop in its July exports, while US indices closed lower amid concerns for the banking sector.

ASX futures were unchanged as of 6:00am on Wednesday, suggesting an uncertain open.

Weak Chinese export data, a dimmer financial outlook from the United Parcel Service and a credit downgrade for 10 smaller US banks sent US stock indices into the red on Tuesday.

The S&P 500 lost 0.4% and the Dow Jones Industrial Average declined about 0.5%, or 159 points. The Nasdaq Composite lost 0.8%. Meanwhile, the Canadian S&P/TSX index inched down 0.1%. The declines mostly negated Monday's blue-chip-driven gains and resumed the slide stocks have been on since the start of August.

In commodity markets, Brent crude oil gained 1.0% to US$86.15 a barrel while gold retreated 0.6% to US$1,925.06.

Australian government bonds were lower, with the 2 Year yield dipping to 3.77% and the 10 Year yield declining to 4.01%. US Treasury notes were also lower, with the 2 Year yield down to 4.76% and the 10 Year yield falling to 4.02%.

The Australian dollar dipped to 65.39 US cents from its previous close of 65.73. The Wall Street Journal Dollar Index, which tracks the US dollar against 16 other currencies, inched higher to 97.23.

Asia

Chinese shares closed lower on Tuesday, weighed by the latest data that showed persistent weakness in the country's economic recovery. The contraction in China's July exports undershot the market's expectations. "Markets appear to have become too bullish over the past couple of weeks by overestimating Beijing's policy support and underestimating the downward pressures," Nomura economists said in a research note. Property developers led the session's losses with China Vanke down 1.0% and Gemdale Corp. falling 3.3% following news that Country Garden missed two US dollar bond coupon payments. The benchmark Shanghai Composite Index closed 0.25% lower at 3260.62. The Shenzhen Composite Index fell 0.3% and the tech-heavy ChiNext Price Index retreated 0.5%.

Hong Kong shares closed lower as investors digested China's weaker-than-expected July trade data. China's July exports fell 14.5% on year while imports declined 12.4%. "A worsening export contraction means weaker production, while rapidly deteriorating imports reflects weaker demand within China," Nomura economists said. Losses were broad-based, led by developers and retailers. Country Garden Holdings slumped 14%, Country Garden Services lost 10% and Longfor fell 4.8%. Tech giant JD.com was down 4.2%. The benchmark Hang Seng Index dropped 1.8% to settle at 19184.17, while the Hang Seng Tech Index declined 2.8%.

Japan's Nikkei Stock Average rose 0.4% to close at 32377.29, boosted by Wall Street gains overnight and the yen's weakness. Investors’ appetite for risk has recovered somewhat, but this week's US CPI data will be critical for providing market participants with clues about the Federal Reserve's policy trajectory, said Tina Teng, markets analyst at CMC Markets. Among the best performers on the benchmark index, Meiji Holdings jumped 10.5%, Kawasaki Kisen Kaisha climbed 5.8% and Tokyo Gas added 4.5%.

Indian shares ended lower as investors switched to risk-off mode ahead of the US CPI report and the Reserve Bank of India's rate decision. Losses were led by industrial companies. Mahindra & Mahindra dropped 1.8% and JSW Steel declined 1.5%. Financial stocks gained, with Bajaj Finance rising 1.0% and Axis Bank increasing 0.6%. The benchmark Sensex index declined 0.2% to 65846.50.

Europe

European stocks dropped as Italy's planned windfall tax on bank profits sparked fears of potential similar moves by governments elsewhere. The pan-European Stoxx Europe 600 declined 0.3%, the French CAC 40 slipped 0.7% and the German DAX backtracked 1.1%. Banks and tech shares were among the biggest losers across Europe.

"Bank stocks have taken the brunt of the selling in Europe today thanks to the news of a potential windfall tax in Italy. Where one country goes, others might follow," IG analyst Chris Beauchamp wrote.

In London, the FTSE 100 finished with a 0.4% loss. Glencore was among the biggest fallers on the British index, down 4.2% after the miner and commodity trader reported lower first-half revenue and adjusted pre-tax earnings before interest, depreciation and amortization.

North America

Weak Chinese export data, a dimmer financial outlook from the United Parcel Service and a credit downgrade for 10 smaller US banks sent US stock indices into the red on Tuesday.

The S&P 500 lost 0.4% and the Dow Jones Industrial Average declined about 0.5%, or 159 points. The Nasdaq Composite lost 0.8%. Meanwhile, the Canadian S&P/TSX index inched down 0.1%. The declines mostly negated Monday's blue-chip-driven gains and resumed the slide stocks have been on since the start of August.

Bonds are getting more attractive compared with stocks lately given higher yields and the risk that recession hits corporate earnings in the future, said Cindy Beaulieu, a portfolio manager and soon-to-be chief investment officer for North America at Conning, which manages $205 billion.

"When you look at all-in yields relative to dividend yields in equities, it's a tough trade-off," she said. "You have to wonder how much good value equities are in that scenario."

Financial shares were stung when Moody's lowered credit ratings for 10 smaller US banks and said it was reviewing ratings for six larger ones, including Bank of New York Mellon and US Bancorp. The move renewed concerns over tighter lending and the banking system's ability to withstand sharply higher interest rates.

PNC Financial Services Group and Huntington Bancshares lost 1.8% and 2%, respectively. Bank of America declined 1.9%.

Healthcare shares were the top-performing segment of the S&P 500 Tuesday. Eli Lilly jumped 15% to a new record and led the broader index higher after the drugmaker beat Wall Street's quarterly earnings expectations and reported booming sales for its buzzy diabetes treatment Mounjaro, which is gaining popularity for weight loss.

International Flavors & Fragrances was the S&P 500's biggest loser. The ingredient maker shed 19% after it again slashed its sales forecast for the year, this time by more than 5%. It was the stock's worst day in at least 50 years and dropped shares to their lowest price in more than a decade.

Sealed Air, which makes bubble wrap and other packaging materials, also trimmed its 2023 outlook. Its shares fell 9.5%

Adding to Tuesday's caution, UPS lowered its financial forecast for the remainder of the year because of lower package volumes and fallout from its down-to-the-wire labor negotiations with International Brotherhood of Teamsters.

The shipping company's shares declined 0.9% after it said it was trying to win back customers who diverted 1 million packages a day from UPS during the labor talks. Shares of rival FedEx gained 1.5% Tuesday.

UPS executives said that although its US business performed in line with internal estimates during the second quarter, international markets fared worse than expected.

"In Europe, persistent high inflation and tight financial conditions weighed on the consumer. And in Asia, the slow recovery we experienced in the first quarter stalled in the second quarter," UPS finance chief Brian Newman told investors on a call.

New Chinese data showed that exports from the world's second-largest economy tumbled in July.

The Chinese economy's sluggish emergence from its strict Covid lockdowns might not be as bad as it seems for the global economy, said Dec Mullarkey, managing director of investment strategy and asset allocation at $270 billion money manager SLC Management.

"The bad news would be if China opened with a bang because it would have complicated the inflation picture for the rest of the world, particularly in demand for commodities," Mullarkey said.

Chinese consumers are at a disadvantage to those in the US because they did not receive nearly the amount of stimulus during the pandemic, Mullarkey said.

"The consumer there is not feeling very confident," he said. "They didn't have the same degree of handouts."