Australia

Australian shares are set to open flat following a loss on Wall Street as both North American and European central banks announced plans to continue raising interest rates for longer than expected.

ASX futures were flat at 7207 as of 7:00am on Friday.

US stock losses deepened Thursday, after central bank officials on both sides of the Atlantic signaled they have more work to do to tame inflation and a batch of fresh data heightened recession fears.

The major US stock indices started the week higher, then fell Wednesday when the Federal Reserve raised rates by half a percentage point. What spooked investors wasn't the rate increase, which was widely expected, but the fact that the Fed raised its estimates of how high rates may ultimately have to go.

Europe's central banks followed suit Thursday with their own rate increases, and the European Central Bank signaled, much like the Fed, that investors shouldn't expect a halt in rate increases any time soon.

"This is not a pivot, this is not a slowdown, we are in for the long game," said ECB President Christine Lagarde.

The S&P 500 fell 2.8% Thursday afternoon. The tech-focused Nasdaq Composite dropped 3.3%, and the Dow Jones Industrial Average fell more than 900 points, or 2.7%.

In commodity markets, Brent crude oil slipped 1.79% to $US81.22 a barrel and gold fell 1.62% to US$1,778.06.

In local bond markets, the yield on Australian 2 Year government bonds rose to 3.13% while the 10 Year climbed to 3.45%. Overseas, the yield on 2 Year US Treasury notes declined to 4.24% and the yield on the 10 Year US Treasury notes fell to 3.44%.

The Australian dollar hit 67.04 US cents down from the previous close of 68.63. The Wall Street Journal Dollar Index, which tracks the US dollar against 16 other currencies, edged up to 97.87.

Asia

Chinese shares ended mixed after the country released weaker-than-expected November economic indicators, suggesting the recovery of the world's largest economy is still a while away. Consumption and energy stocks weighed on the market, with Yonghui Superstores Co. down 1.4% and Yankuang Energy Group declining 2.7%. Auto-related companies and chip makers lead the gainers with battery manufacturer CATL rising 5.3% after the company signed a memo to cooperate with Huawei, with the aim of building a global high-end car brand. The Shanghai Composite Index ended down 0.3% to 3168.65, the Shenzhen Composite Index increased 0.3%, and the ChiNext Price Index was 1.3% higher.

Hong Kong shares ended lower after the release of China’s poor November economic data and negative sentiment took hold again despite a recent upturn. The Hang Seng index fell 1.5% to 19368.59 as tech and consumer companies, which led the rally of the past few weeks, retreated. The Hang Seng Tech index ended 2.4% lower at 4136.42, dragged by Baidu with a 4.1% fall and Alibaba Group, which was 4% lower. Budweiser Brewing decreased by 3.0%, narrowing its year-to-date gains. Chip makers and auto-related companies led the gainers, with Great Wall Motor increasing by 1.8%.

Japanese stocks ended lower, dragged by falls in electronics shares as concerns grew about the US interest rate outlook. Lasertec dropped 2.1% and Keyence lost 1.8%. The Nikkei Stock Average fell 0.4% to 28051.70.

Europe

European stocks fell in closing trade after the European Central Bank raised interest rates by 50 basis points and said it expects rates to rise "significantly" further. The pan-European Stoxx Europe 600 dropped 2.9%, the British FTSE 100 declined 0.9%, the German DAX slipped 3.3%, and the French CAC 40 shed 3.1%. ECB President Christine Lagarde "reset market expectations for how high rates can go, which should cripple the economy," Oanda analyst Edward Moya wrote. "If the next couple of meetings contain consecutive half-point rate increases, the eurozone will have a much deeper recession."

North America

US stock losses deepened Thursday, after central bank officials on both sides of the Atlantic signaled they have more work to do to tame inflation and a batch of fresh data heightened recession fears.

The major US stock indices started the week higher, then fell Wednesday when the Federal Reserve raised rates by half a percentage point. What spooked investors wasn't the rate increase, which was widely expected, but the fact that the Fed raised its estimates of how high rates may ultimately have to go.

Europe's central banks followed suit Thursday with their own rate increases, and the European Central Bank signaled, much like the Fed, that investors shouldn't expect a halt in rate increases any time soon.

"This is not a pivot, this is not a slowdown, we are in for the long game," said ECB President Christine Lagarde.

The S&P 500 fell 2.8% Thursday afternoon. The tech-focused Nasdaq Composite dropped 3.3%, and the Dow Jones Industrial Average fell more than 900 points, or 2.7%.

In past years, such big moves would be more surprising, but in 2022 traders say they've become used to the whiplash. The Nasdaq is on place for its 84th move this year of at least 2% in either direction, according to Dow Jones Market Data. That would be the most of any calendar year since 2002. In 2008, there were 83 days the Nasdaq Composite rose or fell at least 2%.

"There are likely to be fits and starts, some head fakes, and that explains the changing market sentiment from day to day or week to week," said Kristina Hooper, chief global market strategist at Invesco. "It's likely to continue until a Fed pause is imminent."

Data on Thursday also worried many traders. The Commerce Department said retail sales, which includes spending at stores, online and at restaurants, fell 0.6% in November from the prior month. Manufacturing activity in the Philadelphia region also contracted more than expected, according to the Federal Reserve Bank of Philadelphia.

"There's definitely an air of worry about recession in the market right now," said Michael Antonelli, a managing director at Baird. "The market is not worried about inflation anymore. It's worried about looming recession or the Fed going too far."

The recession concern is weighing on shares of banks and lenders, Mr. Antonelli said. So far this month, financial companies in the S&P 500 are down roughly 7%, making financials one of the worst-performing sectors in the index during that period.

In new projections released Wednesday, most Fed officials penciled in plans to raise the federal-funds rate to a peak level between 5% and 5.5% in 2023 and hold it there until some time in 2024. The projections showed considerable divergence over what might happen after next year.

Investors had hoped that moderating price pressures could persuade officials to ease the pace of rate rises or shorten the length of time during which interest rates would remain elevated. The Fed's meeting reversed some of those expectations.

"What we learned yesterday is that they are planning to hold for longer than we thought," said Hani Redha, a portfolio manager at PineBridge Investments. "The message becomes don't expect any monetary relief any time soon, even if the inflation numbers continue to decline."