Australia

Australian shares are set to edge lower following a dip on Wall Street. US stocks declined following an increase in weekly jobless claims, and ahead of tomorrow's payrolls report for September. OPEC's output cut announcement is also fueling inflation and economic-growth fears.

ASX futures were down 46 points or 0.67% at 6774 as of 7:00am on Friday, pointing to a slip at the open.

US stocks moved lower Thursday, stumbling again after a red-hot start to the week.

The S&P 500 fell 1% as of 4 p.m. ET. The Dow Jones Industrial Average declined more than 1%, or 347 points, while the tech-focused Nasdaq Composite slipped 0.7%.

The S&P 500 had soared a combined 5.7% on Monday and Tuesday -- its best two-day percentage gain since April 2020. But Wednesday's performance, when all three indexes finished lower, served as a reminder that rallies in 2022 have often been fleeting.

"This week has been a really good example of where market psychology is, " said Chris Zaccarelli, chief investment officer at Independent Advisor Alliance. "There are risks to the economy and corporate profits. The question is: Are enough of those challenges priced in?"

In commodity markets, Brent crude oil rose 1.41% to $US94.69 a barrel, gold edged down 0.1% to US$1,714.47.

In local bond markets, the yield on Australian 2 Year government bonds rose to 3.21% while the 10 Year rose to 3.77%. Overseas, the yield on 2 Year US Treasury notes rose to 4.23% and the yield on the 10 Year US Treasury notes was up to 3.82%

The Australian dollar hit 64.04 US cents down from the previous close of 64.89. The Wall Street Journal Dollar Index, which tracks the US dollar against 16 other currencies edged up to 103.84.

Asia

Chinese stock markets are closed this week.

Hong Kong's Hang Seng Index ended 0.4% lower at 18012.15, pulling back from Wednesday's strong rebound."The aggressive paring of losses in US indices overnight...may suggest that market bulls are attempting to hang on despite the lack of reinforcement from economic data for the dovish-pivot narrative," IG market strategist Yeap Jun Rong says in a note. Property stocks were lower, with Country Garden declining 3.6% and China Resources Land falling 2.4%. Chinese electric-vehicle battery maker CALB Co. ended flat on its Hong Kong trading debut amid a cooling equities market.

The Nikkei Stock Average ended 0.7% higher at 27311.30, helped by gains in energy shares, despite uncertainties about the global economic outlook. Energy stocks tracked higher oil prices on news that OPEC+ agreed to a production cut. Idemitsu Kosan rose 0.9% and Inpex advanced 2.0%. Rakuten Group ended 4.6% higher after news Mizuho Financial Group is mulling taking a stake in Rakuten's online brokerage unit.

Europe

The pan-European STOXX Europe 600 Index is down 0.64%, the German DAX Index is down 0.37%, while the French CAC 40 Index is down 0.82%.

In London, the FTSE 100 on Thursday closed down 0.8% with OPEC production cuts raising risks of prolonged inflationary pressures, IG's senior market analyst Joshua Mahony said.

Furthermore, the pound has been under pressure over the course of the day despite seeing a recovery from the volatility driven by Chancellor Kwasi Kwarteng's mini budget, Mr. Mahony added. The focus returns to the question of when the dollar's dominance will continue, he said. The index's top fallers were Rolls-Royce Holdings, Kingfisher and St. James's Place, closing down 3.6%, 3.3% and 3.3%, respectively.

North America

US stocks moved lower Thursday, stumbling again after a red-hot start to the week.

The S&P 500 fell 1% as of 4 p.m. ET. The Dow Jones Industrial Average declined more than 1%, or 347 points, while the tech-focused Nasdaq Composite slipped 0.7%.

The S&P 500 had soared a combined 5.7% on Monday and Tuesday -- its best two-day percentage gain since April 2020. But Wednesday's performance, when all three indexes finished lower, served as a reminder that rallies in 2022 have often been fleeting.

"This week has been a really good example of where market psychology is, " said Chris Zaccarelli, chief investment officer at Independent Advisor Alliance. "There are risks to the economy and corporate profits. The question is: Are enough of those challenges priced in?"

The week's seesaws reflect investors' attempts to wrestle with the US economy's uncertain path as it absorbs the Federal Reserve's interest-rate hikes. Lately, investors have often interpreted bad economic news as good news for markets, believing that economic weakness will force the Fed to slow its interest-rate increases.

At the start of the week, weakness in the labor market and manufacturing sector made some investors think that the Fed could pump the brakes on its aggressive rate increases.

But a series of strong data releases Wednesday, combined with hawkish comments by Fed officials, persuaded many that the central bank's current path will likely be undeterred.

On Thursday morning, investors decided that bad economic news actually was bad. Initial jobless-claims data showed that claims rose to 219,000 for the week ended Oct. 1, more than the 203,000 that economists expected. Stock futures, which had been trading lower, pared their losses immediately after the data's release, but then turned lower again.

"There is a misconception that the Fed will make a pivot as soon as we see an economic deterioration," said Florian Ielpo, head of macro at Lombard Odier Investment Managers. "The message for us is very simple: The slowdown is happening. It's likely to be a recession. And equities need to start showing a better pricing of recession risk."

Mr. Ielpo said he has been positioning more defensively across his flagship portfolio since August, but last week bumped the portfolio's cash holding up to 75% amid the "joint collapse of bonds and equities." That cash allocation, he said, is the highest since the heart of the Covid-19 crisis in 2020.

"I think it's very hard to be optimistic for the quarter to come," he said, adding that he believes that a slowdown in earnings is "barely priced in by the markets." Earnings season will kick off in earnest next week, with reports due from companies including JPMorgan Chase.

Additionally, investors on Thursday said they were digesting the Wednesday agreement by the Organization of the Petroleum Exporting Countries and its Russia-led allies to slash output by two million barrels of oil a day -- a decision that officials fear could exacerbate inflation and slow economic growth. Brent rose 1.1% to $94.42.