Australia

Australian shares are set to open flat after a drop on Wall Street. Major US indices ended the week, month and quarter lower as interest rates continue to rise even as inflation stays stubbornly high. Investors in Europe will be keeping an eye on the developing situation at Credit Suisse Group, even as online chatter about the firm’s finances continues.

ASX futures were up 5 points or 0.07% at 6471 as of 7:00am on Monday, pointing to a flat open.

US stocks fell Friday, closing out a losing week, month and quarter as investors wrestled with more signs of persistently high inflation.

On Friday, major indexes locked in their quarterly losses with another down day. The S&P 500 fell 54.85 points, or 1.5%, to 3585.62. The Dow Jones Industrial Average dropped 500.10 points, or 1.7%, to 28725.51. The Nasdaq Composite declined 161.89 points, or 1.5%, to 10575.62.

All three indexes ended at their lowest closing levels since 2020. The Dow Jones Industrial Average is down 21% in 2022, the S&P 500 is off 25% and the tech-heavy Nasdaq Composite has slumped 32%.

In commodity markets, Brent crude, the global oil benchmark, edged down 0.6% Friday to $87.96 per barrel. Brent prices lost 23% for the quarter but are still up 13% in 2022. Meanwhile gold is flat at US$1,660.61.

In local bond markets, the yield on Australian 2 Year government bonds dropped to 3.28% while the 10 Year fell to 3.88%. Overseas, the yield on 2 Year US Treasury notes rose to 4.287% and the yield on the 10 Year US Treasury notes was up to 3.83%.

The Australian dollar hit 63.99 US cents. The Wall Street Journal Dollar Index, which tracks the US dollar against 16 other currencies edged up to 103.95.

Asia

Stock markets in the Asia-Pacific region mostly fell. Benchmark indexes in Australia, Japan, South Korea and mainland China dropped between 0.6% and 1.8%, while Hong Kong's Hang Seng Index added 0.3%.

China stocks ended the session lower, extending the broad downturn marked in recent weeks as higher interest rates pushed down global equities. The benchmark Shanghai Composite Index slipped 0.6% to settle at 3024.39, while the Shenzhen Composite Index fell 1.3% to 1912.00. The tech-heavy ChiNext Price Index suffered the steepest decline, ending 1.9% lower at 2288.97. Losses were concentrated in new-energy sectors, as these riskier, high-growth stocks are particularly vulnerable in a high-rate environment. EGing Photovoltaic shed 6.8% and Zhejiang Narada Power Source fell 7.3%.

Hong Kong's Hang Seng rose. "In addition to recessionary and geopolitical concerns, China's central bank seems poised to intervene in an effort to stabilize its currency, with any such move adding to the country's current woes around Covid-19, a wilting property sector and declining consumer sentiment," Interactive Investor Head of Markets, Richard Hunter, wrote.

Europe

European shares mostly rose for Friday, with the Stoxx Europe 600 index adding 1.3% for the day – but all the indices are down for the quarter.

The STOXX Europe 600 Index is down 19.35 points or 4.75% this quarter to 387.85, the German DAX is down 669.41 points or 5.24% this quarter to 12114.36, and the French CAC 40 Index is down 160.52 points or 2.71% this quarter to 5762.34.

In London, the FTSE 100 Index is down 275.47 points or 3.84% this quarter to 6893.81.
Europe will be closely watching the Credit Suisse Group AG situation. Credit Suisse shares are down 21% this month and spreads on its credit-default swaps, a type of insurance against default, rose to their highest level of the year on Friday. The deteriorated market condition indicates that Credit Suisse could struggle to raise new shares to pay for a planned restructuring and that its funding costs could rise sharply.

The Swiss bank has a large domestic business serving all types of customers and competes globally in wealth management, investment banking and asset management. Its stock has traded below book value, a commonly followed metric by investors, for years as a succession of executive teams struggled to contain problems within the bank.

In a memo to staff on Friday, Chief Executive Ulrich Körner told employees that the bank is at a critical moment before it presents a strategy update outlining plans for the investment bank on Oct. 27. He said not to confuse its stock price performance with its capital strength and liquidity. The memo appeared to spark fresh concerns and spilled into an online frenzy on Twitter and on Reddit investment discussion boards on Saturday and Sunday.

North America

US stocks fell Friday, closing out a losing week, month and quarter as investors wrestled with more signs of persistently high inflation.

Major indexes have sustained deep losses this year as the Federal Reserve raises interest rates in an attempt to tame rising prices. The S&P 500, Dow Jones Industrial Average and Nasdaq Composite on Friday all recorded their worst first nine months of a calendar year since 2002, according to Dow Jones Market Data.

On Friday, major indexes locked in their quarterly losses with another down day. The S&P 500 fell 54.85 points, or 1.5%, to 3585.62. The Dow Jones Industrial Average dropped 500.10 points, or 1.7%, to 28725.51. The Nasdaq Composite declined 161.89 points, or 1.5%, to 10575.62.

All three indexes ended at their lowest closing levels since 2020. The Dow Jones Industrial Average is down 21% in 2022, the S&P 500 is off 25% and the tech-heavy Nasdaq Composite has slumped 32%.

With the central bank signaling it is committed to bring inflation under control, investors have grown fearful that its campaign of rate increases will meaningfully slow the economy.

"In the trade-off between growth and inflation, the Fed is going to choose inflation," said Desmond Lawrence, senior investment strategist at State Street Global Advisors. "That's what's really giving you the choppiness that we've had in the past week in particular."
All three indexes fell for a third consecutive quarter. For the S&P 500 and Nasdaq, it was the longest quarterly losing streak since streaks ending in March 2009, according to Dow Jones Market Data.

The final day of the quarter brought more evidence of the price pressures that the Fed is trying to contain. A measure of inflation that excludes volatile food and energy costs rose to a 4.9% year-over-year increase from 4.7% the prior month, according to the Commerce Department. A month-over-month reading also increased.

"It's really just another indication that inflation is still broadening, " said Eric Diton, president and managing director at The Wealth Alliance. "For anyone who's watching the Fed, it's ammunition for the Fed to keep hiking rates, which is certainly bearish for stocks and bonds."

Among individual stocks, Nike shares tumbled $12.21, or 13%, to $83.12 after the sneaker giant said inventories jumped 44%, while higher discounts and freight costs squeezed profit margins.

New data showed the eurozone's annual rate of inflation hit 10% in September as Russian action to curtail the bloc's gas supply drove energy prices higher.