Australia

Australian shares are positioned to decline today after US indices closed February on a low note. With inflation still elevated, investors are anticipating higher-for-longer interest rates.

ASX futures were 20 points or 0.3% lower as of 8:00am on Wednesday, pointing to a dip at the open.

US stock indices wobbled Tuesday but wrapped up the session with losses.

The S&P 500 ended the session 0.3% lower after swinging up and down most of the day. The technology-focused Nasdaq Composite shed 0.1% and the Dow Jones Industrial Average slid 0.7%, or 234 points.

The indices finished February in the red. Stocks charged higher to kick off 2023, with the S&P 500 and Nasdaq Composite peaking for the year on Feb. 2. However, the gains unraveled as hotter-than-expected economic releases, including data on the labor market and consumer spending, spurred investors to reassess their expectations for inflation and monetary policy.

In commodity markets, Brent crude oil gained 1.75% to $US83.89 a barrel while gold added 0.57% to US$1,827.56.

The yield on Australian 2 Year government bonds dipped to 3.59% while the 10 Year edged down to 3.85%. US Treasury note yields continued rising, with the 2 Year increasing to 4.80% and the 10 Year climbing to 3.91%.

The Australian dollar was unchanged at 67.36 US cents. The Wall Street Journal Dollar Index, which tracks the US dollar against 16 other currencies, edged up to 97.93.

Asia

Chinese stocks ended higher Tuesday, with the benchmark Shanghai Composite Index rising 0.7% to 3279.61. The Shenzhen Composite Index rose 0.8% to settle at 2142.08, while the tech-heavy ChiNext Price Index also climbed 0.8% to 2429.03. Tech shares rebounded from Monday's losses to lead gains. Confidence in the tech sector was boosted by Beijing's latest national digitization plan, which promises better funding and support for digital industries. The three telecom majors, which analysts say could enjoy substantial growth opportunities from deepened digitization, were among the top winners. China Telecom jumped 6.4%, China Unicom grew 3.7% and China Mobile gained 2.7%.

Hong Kong's Hang Seng Index fell 0.8% to 19785.94, its lowest closing level since late December, amid broad-based losses. Inflation is still the key concern for investors following last week's hotter-than-expected U.S. inflation readings, said Michael Hewson, chief market analyst at CMC Markets. Among the HSI's worst performers, Xinyi Solar slid 9.2%, Geely Automobile dropped 5.0% and Longfor Group lost 4.9%. Meanwhile, China Unicom (Hong Kong) rose 5.3% and China Mobile added 2.6%. The Hang Seng Tech Index declined 1.6% to close at 3925.06.

Japan’s Nikkei Stock Average ended 0.1% higher at 27445.56 as gains in the tech and real estate sectors helped offset losses in steel and shipping stocks. M3 rose 2.2% and Mitsubishi Estate gained 1.8% as concerns about borrowing costs eased. Meanwhile, Nippon Steel fell 3.0% and Nippon Yusen dropped 3.0% amid uncertainty about the economic outlook.

Indian stocks ended lower, extending recent losses amid rising worries over the Fed's potentially more aggressive-than-expected monetary tightening in the coming months. The benchmark Sensex index shed 0.55% to settle at 58962.12. A wide range of sectors weighed on the market. Both oil major Reliance Industries and steel producer Tata Steel fell 2.0%, while Bajaj Finserv was down 1.8%. IT-services providers Infosys and Tech Mahindra respectively shed 1.5% and 1.1%.

Europe

European stocks lost earlier gains on Tuesday as Wall Street traded lower following economic data. The pan-European Stoxx Europe 600 dropped 0.2%, the German DAX shed 0.1% and the French CAC 40 lost 0.4%. CMC analyst Michael Hewson attributed the losses to poor economic data. “Consumer confidence for February fell back to 102.90, while the latest Chicago PMI also came in weaker,” Hewson noted.

The British FTSE 100 closed down 0.74% Tuesday, dragged by losses in chemical and drug stocks. Disappointing results hit the shares of online grocer Ocado, which finished the session 10.6% lower, specialty chemicals group Croda International, down 4.1% and testing company Intertek, which shed 4.6%. Meanwhile, fund manager Abrdn and St. James's Place edged higher on the back of better-than-expected full-year results.

North America

US stock indices wobbled Tuesday but wrapped up the session with losses.

The S&P 500 ended the session 0.3% lower after swinging up and down most of the day. The technology-focused Nasdaq Composite shed 0.1% and the Dow Jones Industrial Average slid 0.7%, or 234 points.

The indices finished February in the red. Stocks charged higher to kick off 2023, with the S&P 500 and Nasdaq Composite peaking for the year on Feb. 2. However, the gains unraveled as hotter-than-expected economic releases, including data on the labor market and consumer spending, spurred investors to reassess their expectations for inflation and monetary policy.

Derivatives markets show traders now expect the Federal Reserve to lift interest rates well above 5% this year, and then keep them there, as officials try to bring inflation under control.

Earlier this year, traders had anticipated the central bank would cut rates in 2023. That change has spurred many investors to reshuffle their portfolios throughout February. Some investors pulled money out of equity funds and scooped up hedges to protect against a downturn.

"The growing realization through February was that actually the US economy is not responding sufficiently to the Fed hikes" so far, said Seema Shah, chief global strategist at Principal Asset Management. "And that has meant that the labor market has continued to tighten and that, as a result, inflation pressures are still hot and heavy and simply not likely to decelerate."

Ms. Shah added that while the Fed had early success in bringing year-over-year inflation down from its peak of 9.1% in June to 6.4% in January, the next leg lower may be a harder battle. She said she remains pessimistic about US stocks.

Jason Pride, chief investment officer for private wealth at Glenmede, said the retreat in stocks in February was consistent with his view that a recession would hit the US later this year, and that stocks had further to slide. "Our view is that the market still isn't reflecting the potential risk of a recession," Mr. Pride said.

Among individual stocks, Target shares climbed 1% after the retailer said its same-store sales rose 0.7% in its most recent quarter, compared with the same period a year earlier, with more shoppers visiting. But Target said shoppers spent differently, with strong sales in food, beauty and essentials such as paper towels offsetting weaker spending in other areas.

Goldman Sachs shares fell 3.8% as the bank held an investor day and CEO David Solomon said it was considering "strategic alternatives" for its struggling consumer platforms business.

Shares of Zoom Video Communications gained 1.2%, boosted by higher sales in the fourth quarter and a stronger profit forecast than Wall Street expected. The videoconferencing company was a pandemic-era market darling whose shares have suffered over the past half-year as many Americans have returned to the office.