Australia

Australian shares are set to open lower on Monday following a turbulent week on Wall Street. US and European central banks caused investors to worry after raising interest rates even higher and signalling continued hikes next year.

ASX futures were pointing to a 0.4% fall at the open.

Stocks fell again Friday, with investors forced to wrestle with the prospect of higher-for-longer interest rates and the potential for recession.

The S&P 500 dropped 1.3% Friday afternoon, a day after falling 2.5%. Each of the index's 11 sectors was down.

The Dow Jones Industrial Average fell 1.2%, or about 400 points, and the technology-focused Nasdaq Composite lost 1.1%. All three major indices are on track to lose more than 2% this week, with technology stocks and other growth-sensitive segments suffering the most.

Investors who had been growing optimistic because of moderating inflation now find themselves worried about a slowdown in economic growth. New services and manufacturing data on Friday added to those concerns.

Private sector bottom lines are suffering from weak consumer demand. Though inflation is cooling, higher input and borrowing costs are weighing on both businesses and households, said S&P Global Market Intelligence. Excluding the Covid-19 downturn, this is the quickest softening in business activity since 2009, the data provider said.

The market rallied early in the week when slowing inflation data stirred hopes that the Federal Reserve could back away from aggressive interest rate increases. The Fed's revised rate forecasts on Wednesday and slowing retail sales data on Thursday reversed those gains and raised fears of a recession.

In commodity markets, Brent crude oil dropped 2.88% to $US78.87 a barrel and gold gained 0.83% to US$1,791.58.

In local bond markets, the yield on Australian 2 Year government bonds fell to 3.12% while the 10 Year remained at 3.45%. In the US, the yield on 2 Year Treasury notes declined to 4.17% and the yield on 10 Year Treasury notes was down at 3.48%.

The Australian dollar dropped from its previous close of 66.98 US cents to 66.89. The Wall Street Journal Dollar Index, which tracks the US dollar against 16 other currencies, edged down to 97.83.

Asia

Chinese shares finished broadly lower on Friday, ending a six-week rally spurred by the country's reopening. Hardware and software stocks weighed on the market, with semiconductor producer Naura Technology Group dropping 2.4% and Beijing Kingsoft Office Software losing 2.1%. Property stocks outperformed after China's vice premier said Beijing is considering more measures to support the embattled real estate sector. Gree Real Estate rose by the 10% daily limit and China Vanke added 1.4%. The Shanghai Composite Index ended flat at 3167.86 for the day, and lost 1.2% for the week. The Shenzhen Composite Index finished the session 0.7% lower, while the ChiNext Price Index shed 1.1%.

Hong Kong's Hang Seng Index outperformed regional markets to end 0.4% higher at 19450.67, supported by Chinese property developers. The real estate sector's upturn came amid stronger expectations of policy support. Country Garden Holdings rose 5.9% and China Resources Land added 3.9%. Wuxi Biologics advanced 5.4% after its unit was removed from the US Commerce Department's unverified list. Some US-listed Chinese companies gained, after the Public Company Accounting Oversight Board (PCAOB) secured complete access to inspect China-based audit firms. Alibaba Group climbed 0.6% and JD.com was up 1.5%. Among laggards, Xinyi Solar fell 3.0% and Techtronic Industries lost 2.3%. The Hang Seng index lost 2.3% for the week.

Japanese stocks ended lower, weighed by losses in both electronics and tech stocks, as concerns grew about the global economic outlook amid policy tightening by central banks. Tokyo Electron Ltd. dropped 4.5% and SoftBank Group lost 3.8%. Meanwhile, Toshiba Corp. gained 2.1% following reports that a group led by Japan Industrial Partners has secured financing to take over the industrial company. The Nikkei Stock Average fell 1.9% to 27527.12

Europe

European stocks fell in closing trade Friday after the Federal Reserve, European Central Bank, Bank of England, and other central banks all raised interest rates this week and signaled further hikes. The pan-European Stoxx Europe 600 dropped 1.2%, the British FTSE 100 declined 1.3%, the German DAX fell 0.7%, and the French CAC 40 slipped 1.1%.

"Stock markets are going into the festive period in a downbeat mood, as central banks this week reaffirmed their commitment to raising rates," Oanda analyst Craig Erlam wrote. "Considering the eagerness of investors to embrace the imminent end of the tightening cycle, you can understand the positions being adopted by central banks."

North America

Stocks fell again Friday, with investors forced to wrestle with the prospect of higher-for-longer interest rates and the potential for recession.

The S&P 500 dropped 1.3% Friday afternoon, a day after falling 2.5%. Each of the index's 11 sectors was down.

The Dow Jones Industrial Average fell 1.2%, or about 400 points, and the technology-focused Nasdaq Composite lost 1.1%. All three major indices are on track to lose more than 2% this week, with technology stocks and other growth-sensitive segments suffering the most.

Investors who had been growing optimistic because of moderating inflation now find themselves worried about a slowdown in economic growth. New services and manufacturing data on Friday added to those concerns.

Private sector bottom lines are suffering from weak consumer demand. Though inflation is cooling, higher input and borrowing costs are weighing on both businesses and households, said S&P Global Market Intelligence. Excluding the Covid-19 downturn, this is the quickest softening in business activity since 2009, the data provider said.

The market rallied early in the week when slowing inflation data stirred hopes that the Federal Reserve could back away from aggressive interest rate increases. The Fed's revised rate forecasts on Wednesday and slowing retail sales data on Thursday reversed those gains and raised fears of a recession.

The central bank said Wednesday it planned to lift rates through the spring and to a higher level than previously forecast. Fed forecasts also suggested the central bank would hold rates at their peak until 2024, rattling some investors who had expected officials to begin cutting rates next year.

"They've effectively raised the bar on the magnitude and pace by which inflation would have to fall to warrant...a true pivot where they would actually be cutting rates," said Hani Redha, portfolio manager at PineBridge Investments. "That's really bearish."

The European Central Bank said this week it would continue to raise rates in half-percentage-point increments next year. The Bank of England was the only major central bank this week to signal caution about raising rates much higher, saying it believed the UK economy was already in a recession.

Some investors are less concerned about the equity selloff, seeing a buying opportunity.

"I think that finally, there's an opportunity for investors to start putting money to work," said Nancy Tengler, chief executive and chief investment officer of Laffer Tengler Investments.

Many investors pared back from the stock market during the early stages of Fed tightening, and the looming recession has kept money on the sidelines. Ms. Tengler said that once investors' focus shifts to corporate earnings and margins -- which she believes will prove more resilient than Wall Street expects -- sentiment will improve.