Australian shares are set to open lower, after a rise in US bond yields spooked investors.

ASX futures were down 0.7% or 52 points as of 8:30am on Thursday, suggesting a lower open.

U.S. stock indexes dropped Wednesday after bond yields climbed to their highest level in a month.

The S&P 500 declined 0.7%, the tech-heavy Nasdaq fell 0.6%, and the Dow Jones Industrial Average dropped 1.1%, or 411 points.

In commodity markets, Brent crude oil was down 0.7% to US$83.60 a barrel, while gold was unchanged at US$2,338.08.

In local bond markets, the yield on Australian 2 Year government bonds was up at 4.13% while the 10 Year yield was also up at 4.39%. US Treasury notes were up, with the 2 Year yield at 4.97% and the 10 Year yield at 4.61%.

The Australian dollar was 66.09 US cents, up from its previous close of 66.08. The Wall Street Journal Dollar Index, which tracks the US dollar against 16 other currencies, was up at 99.81.


Chinese shares ended higher, led by carmakers and metal stocks. Sentiment was likely buoyed by fresh property policy support from Chinese cities, with Guangzhou and Shenzhen easing homebuying curbs and lowering mortgage rates. Continued support for the ailing sector is probably lifting hopes about the country's economic recovery. The IMF also earlier raised its economic growth forecasts for China. Auto and metal stocks led the gains, with BYD surging 8.35% and Hunan Gold adding 10%. Decliners included Industrial & Commercial Bank of China, which lost 0.4%, and Bank of China, which shed 0.7%. The benchmark Shanghai Composite Index ticked up 0.05%; the Shenzhen Composite Index and the ChiNext Price Index gained 0.3% each.

Hong Kong shares closed lower, weighed by consumer-related tech stocks, as investors await key economic data from both China and the U.S. later this week. The benchmark Hang Seng Index dropped 1.8% to end at 18477.01, while the Hang Seng Tech Index shed 2.3%. Alibaba dropped 3.5% and Meituan was down 5.3%. Lenovo pared some losses in afternoon trade to end 1.7% lower after it issued US$2 billion of convertible bonds to a unit of Saudi Arabia's sovereign wealth fund. Auto stocks rose, with BYD gaining 5.3% after it unveiled new hybrid technology that enables its cars to travel more than 2,000 kilometers without recharging or refueling.

Japanese stocks ended lower, dragged by falls in electronics and machinery stocks, as the 10-year Japanese government bond yield hit a new 12-year high. Mitsubishi Electric lost 4.5% and Mitsubishi Heavy Industries dropped 3.6%. The 10-year JGB yield rose 4 basis points to 1.075%, the highest level since December 2011. The Nikkei Stock Average fell 0.8% to 38556.87. Investors are focusing on U.S. economic data and their policy implications.

India's benchmark Sensex closed 0.9% lower at 74502.90, weighed by bank stocks. Markets are likely digesting a Fed official's hawkish comments saying policymakers haven't entirely ruled out additional interest-rate increases, ING economists write in an note. Among decliners, ICICI Bank fell 2.2%, Axis Bank lost 1.9% and HDFC Bank shed 1.5%. Among gainers, Power Grid Corp. of India gained 1.5%, Sun Pharmaceutical Industries rose 0.9% and Nestle India was 0.7% higher.


Stocks in the U.K. slipped Wednesday, as the FTSE 100 Index declined 0.9% to 8183.70.

Among large companies, Ocado Group PLC posted the largest decline, dropping 12%, followed by shares of IWG PLC, which dropped 11%. Shares of Fevertree Drinks PLC dropped 7.1%.

Ithaca Energy PLC was the biggest gainer during the session, surging 8.4%, and International Distribution Services PLC surged 4.3%. TP ICAP Group PLC rounded out the top three movers on Wednesday, as shares gained 3.4%.

In Europe, shares closed lower, with the STOXX Europe 600 Index dropping 1.1% to 513.45, Germany's DAX fell 1.1% to 18,473.29 and France's CAC 40 shed 1.5% to 7,935.03.

North America

U.S. stock indexes dropped Wednesday after bond yields climbed to their highest level in a month.

The S&P 500 declined 0.7%, with all 11 of its sectors posting declines. The tech-heavy Nasdaq fell 0.6% from its record high reached a day earlier. The Dow Jones Industrial Average dropped 1.1%, or 411 points.

After rallying through most of May, stock indexes have faltered more recently as investors continue recalibrating how the Federal Reserve might move on interest rates this year.

Minneapolis Fed President Neel Kashkari said this week that the central bank could hold rates higher for longer to gain clarity on inflation, and warned that a hike isn't off the table. Investors now see a 54% chance the Fed keeps rates unchanged through its next three meetings, according to the CME FedWatch tool, up from 42% a week ago.

Investors on Wednesday also showed relatively lackluster appetite for 7-year Treasurys in a $44 billion auction, following similarly soft demand for auctions of 2-year and 5-year notes on Tuesday.

The benchmark 10-year Treasury yield rose to 4.623%, from 4.542% Tuesday. That marked its highest level since April 30.

"We're definitely seeing a risk-off day in the stock market and that's being led by what's happening in the bond market," said Chris Zaccarelli, chief investment officer for Independent Advisor Alliance. "The market is having a hard time digesting these Treasury auctions."

Higher yields on Treasurys make it less attractive to hold riskier stocks. They also increase borrowing costs across the economy, including for mortgages and corporate debt.

For the year, the S&P 500 is still up 10%, including a 4.6% gain for May so far.

Among individual stocks Wednesday, Marathon Oil shares jumped 8.4% after ConocoPhillips agreed to acquire the company for $17.1 billion. Shares of American Airlines fell more than 13% after the carrier cut its outlook.

With earnings season winding down, investors are awaiting new information to justify pushing share prices higher. On Friday, the Fed's favored inflation gauge will be released. Economists expect the personal-consumption expenditures price index rose 2.7% in April from a year earlier.

"We really have an absence of news," said John Lynch, chief investment officer for Comerica Wealth Management. "We're trying to figure out what the next catalyst is."