Australia

Australian shares are set to open flat following a dip on Wall Street as investors brace for a further US Federal Reserve rate hike on Wednesday (early Thursday AEST).

ASX futures were down 2 points, mostly flat at 6854 as of 7:00am on Tuesday, pointing to a flat open.

US stocks slipped Monday as the Federal Reserve prepared to meet this week to discuss how much more to raise interest rates as it tries to calm inflation.

The S&P 500 declined 0.5% and the tech-focused Nasdaq Composite Index shed 0.99%. The Dow Jones Industrial Average dropped 0.14%. U.S. stocks rose on Friday, and major indexes are on track to close out October with gains.

Traders are shuffling their holdings ahead of Wednesday, when traders think Fed officials are almost certain to raise interest rates by another 0.75 percentage point. The focus will be on remarks by Fed Chairman Jerome Powell, which could bring clues about whether the Fed may slow the size and pace of rate increases, or continue strong efforts to tame rising prices.

"I'm anticipating hearing Powell walking a fine line, trying to point out some of the positive data without the market taking it as a full-blown pivot," Luke Tilley, chief economist at Wilmington Trust, said of his expectations for Mr. Powell's remarks Wednesday.

In commodity markets, Brent crude oil slipped 0.98% to $US94.83 a barrel, gold edged down 0.65% to US$1,634.16.

In local bond markets, the yield on Australian 2 Year government bonds rose to 3.22% while the 10 Year rose to 3.75%. Overseas, the yield on 2 Year US Treasury notes climbed to 4.5% and the yield on the 10 Year US Treasury notes was up to 4.10%.

The Australian dollar hit 63.92 US cents down from the previous close of 64.12. The Wall Street Journal Dollar Index, which tracks the US dollar against 16 other currencies edged up to 103.75.

Asia

Chinese shares ended mixed with the Shenzhen Composite Index and the ChiNext index turning positive after falling in the previous two sessions, suggesting an improvement in investors' sentiment even while lower-than-expected China PMI data released Monday implied headwind for the country's economic recovery. Software-related stocks outperformed the market, with Beijing Kingsoft Office up 4.4% and Yonyou Network 3.6% higher. Among the losers were Chinese developers and energy stocks. The Shanghai Composite Index ended 0.8% lower at 2893.48, the Shenzhen Composite Index increased 0.4%, and the ChiNext Price Index was 0.6% higher.

Hong Kong stocks ended the session lower, as a punishing selloff continued amid investor worries regarding both China's outlook and global economies. The benchmark Hang Seng Index lost 1.2% to settle at 14687.02. That took the index's October loss to 15% and set the benchmark back by more than 37% in the year to date, making Hong Kong one of the worst-performing equities markets in Asia. Chinese developers led Monday's losses. Longfor tumbled 24% after its founder and chairwoman stepped down, stoking fears that the resignation is a sign of worse-than-expected operational difficulties in China's real estate sector.

The Nikkei Stock Average closed 1.8% higher at 27587.46 amid continued hopes for earnings growth and that the Fed might slow its pace of tightening. Electronics stocks led the gains, with Fuji Electric adding 3.0% and Hitachi advancing 6.0%. Keyence Corp. rose 8.9% after posting a jump in first-half net profit. Toyota's trading arm, Toyota Tsusho, ended 8.1% higher after raising its full-year net profit forecast following stronger first-half earnings.

Europe

European stocks trade mostly higher in closing trade as investors weigh eurozone data and await policy decisions from the Federal Reserve and Bank of England later in the week. The pan-European Stoxx Europe 600 rose 0.4%, the DAX climbed 0.1%, and the CAC 40 fell 0.1%.

Travel stocks and banks are top risers on the Stoxx while retail and industrial stocks fall. Data today showed eurozone inflation in October accelerated more than expected by analysts in a WSJ survey while the economy grew at a slower pace in 3Q, albeit better than forecast. The Fed and BOE's policy decision are on Wednesday and Thursday, respectively, with some analysts expecting a more cautious stance.

In London, the FTSE 100 index closed up 0.7% to 7094.53 on Monday, driven by the financial sector while and a falling British pound.

Banks' shares are benefiting from increased expectations that tighter interest rates will boost income forecasts, chief market analyst at IG, Chris Beauchamp, says in a note. However, gains were limited by fears that U.S. Federal Reserve could be more hawkish than expected this week, Beauchamp notes.

British Airways-owner IAG led the index's gains, up 5.4% amid reports that it could buy easyJet and Portuguese Airline TAP. Following were Centrica, which rose 4.7%, and NatWest Group, up 4.5%. Among the biggest fallers, Intertek Group was down 2.7% and Airtel Africa 1.6%.

North America

US stocks slipped Monday as the Federal Reserve prepared to meet this week to discuss how much more to raise interest rates as it tries to calm inflation.

The S&P 500 declined 0.5% and the tech-focused Nasdaq Composite Index shed 0.99%. The Dow Jones Industrial Average dropped 0.14%. US stocks rose on Friday, and major indexes are on track to close out October with gains.

Traders are shuffling their holdings ahead of Wednesday, when traders think Fed officials are almost certain to raise interest rates by another 0.75 percentage point. The focus will be on remarks by Fed Chairman Jerome Powell, which could bring clues about whether the Fed may slow the size and pace of rate increases, or continue strong efforts to tame rising prices.

For most of the year, the Fed's fastest interest-rate increases since the 1980s have battered markets, but signs of moderation in October helped propel stocks toward monthly gains. The Dow is on track to gain 14% this month, its best monthly result since 1976. In October speeches, some Fed officials said they are considering whether their December meeting should bring a slower pace of tightening as the central bank tries to balance controlling inflation and avoiding a sharp economic contraction.

Specifically, investors want to know if December will yield yet another 0.75-percentage-point rate increase, or whether the Fed will downshift to a half-percentage-point move. Bets in futures markets show that traders see roughly even odds of either outcome, according to CME Group.

"I'm anticipating hearing Powell walking a fine line, trying to point out some of the positive data without the market taking it as a full-blown pivot," Luke Tilley, chief economist at Wilmington Trust, said of his expectations for Mr. Powell's remarks Wednesday.

Whatever the size of December's move, economists caution that high inflation -- still at an 8.2% annual rate in September -- will keep the Fed on track to bring rates up well into next year. Over the weekend, economists at Goldman Sachs raised their estimate of how high the Fed's target interest rate will eventually climb, forecasting rate increases through March. The bank now expects the Fed's target to reach 4.75% to 5% next year, up from the current range of 3% to 3.25%.

Investors are also poring over third-quarter earnings, which have helped boost some companies such as United Airlines and JPMorgan, whose reports showed resilience in a turbulent economy. Some major tech companies such as Microsoft, on the other hand, have seen selloffs after posting lackluster results. This week, nearly a third of the S&P 500 companies will post their latest figures.

In afternoon trading, tech stocks were among the companies that led the S&P 500's losses. Facebook's parent company, Meta Platforms, lost 6.1%, continuing last week's slide that followed a disappointing earnings report. Apple shares fell 1.1% as Foxconn, a major contributor to Apple's iPhone production, struggled with a Covid-19 outbreak at a factory in China.

With more rate rises on the horizon, it is difficult to take much comfort in the stock market's October rally, said Paul Eitelman, chief investment strategist for North America at Russell Investments. Russell has avoided buying into stock-market dips this year, cautious about how an economic downturn could bring further losses.

"I think there's still critical issues that we need to get through as global equities investors in the months ahead," Mr. Eitelman said. "Until the labor market slows down, US monetary policy is going to be a headwind for markets going forward."