Australia

Australian shares are facing downward this morning after a poor session for many global markets. US indices began August on weak footing following broad gains last month.

ASX futures were 43 points or 0.6% lower as of 6:00am on Wednesday, suggesting losses at the open.

Most US stocks pulled back Tuesday, reflecting a pause after an extended rally.

The S&P 500 fell 0.3%. The tech-heavy Nasdaq Composite backtracked 0.4%. The Dow Jones Industrial Average rose 0.2%, or 71 points. Canadian stocks closed lower, with the S&P/TSX Composite declining by 0.5%.

Tuesday's losses bucked a recent trend of stock market gains. The S&P 500 has risen for five consecutive months, including a 3.1% gain in July. Investors have grown more optimistic that the Federal Reserve will be able to engineer a so-called soft landing, by bringing inflation to heel while avoiding a significant economic contraction.

The rally began with shares of big technology companies, but has recently expanded to other parts of the market such as industrial and financial stocks. All 11 sectors of the S&P 500 rose in July.

In commodity markets, Brent crude oil dipped 0.2% to US$85.30 a barrel while gold gave up 1.1% to US$1,944.36.

Australian government bonds were lower, with the 2 Year yield falling to 3.81% and the 10 Year yield declining to 3.97%. The 2 Year yield for US Treasury notes was unchanged at 4.90% while the 10 Year yield rose to 4.03%.

The Australian dollar slipped to 66.13 US cents from its previous close of 67.15. The Wall Street Journal Dollar Index, which tracks the US dollar against 16 other currencies, leaned higher to 96.81.

Asia

Chinese shares ended flat as consumer brands and insurance companies weighed on the market, keeping the Shanghai Composite from rising. The benchmark index closed without any major gains or losses, remaining near 3290. China Tourism Group Duty Free lost 1.7%, Ping An Insurance dropped 1.6% and China Pacific Insurance slipped 0.7%. Developers added to the losses, despite China's State Council urging local governments to do more to prop up property markets. China Vanke shed 1.05% and China Merchants Shekou slid 1.5%. Focus was also on the unexpected contraction in the Caixin manufacturing PMI for July. Any further policy moves by Beijing will be closely watched as signs of an economic slowdown mount.

Hong Kong's benchmark Hang Seng Index fell 0.3% to close at 20011.12, erasing earlier gains, as shares were dragged by the unexpected contraction in China's Caixin manufacturing PMI for July. Hong Kong's 2Q GDP growth, which slowed to 1.5% on year, also weighed on investor sentiment. Tech and consumer stocks led losses. Xinyi Solar Holdings declined 10% after the company said its first-half net profit fell 27%. China Mengniu Dairy dropped 4.2%. The Hang Seng Mainland Properties Index slid 2.4%, with Country Garden Holdings down 7.6% after the developer scrapped its $300 million primary share placement. Among gainers, HSBC climbed 1.7% and Trip.com was up 2.1%. The Hang Seng Tech Index fell 0.3%.

Japanese stocks ended higher, led by gains in auto and machinery shares as hopes for corporate earnings growth continued. Toyota Motor gained 2.5% after its 1Q net profit rose 78% from a year earlier. Makita jumped 14% after posting a 5.9% increase in its 1Q net profit. The Nikkei Stock Average rose 0.9% to 33476.58.

Indian shares edged lower after a volatile session, as investors digested key corporate earnings. India's benchmark Sensex index closed 0.1% lower at 66549.31, tracking losses in most regional markets. Among gainers, NTPC emerged as the top performer, rising 3.1% in its 11th straight day of gains. IT stocks lent some support to the market, with Tech Mahindra up 2.5% and HCL Technologies rising 1.9%. Power Grid fell 5.4% after saying its 1Q net profit dropped 5.4% on year.

Europe

European stocks fell as Wall Street lost early gains following downbeat economic data. The pan-European Stoxx Europe 600 lost 0.6% while the French CAC 40 and the German DAX each declined by 0.9%. Financial, food delivery and automotive stocks were among the biggest losers.

"It's been a negative start to August for European markets, following some poor manufacturing PMIs. BMW shares slid despite upgrading guidance on its full-year outlook," CMC Markets analyst Michael Hewson wrote, adding that concerns about higher electric vehicle manufacturing costs appear to have caused the fall.

The United Kingdom’s FTSE 100 Index dropped 0.4% to 7666 points, in line with global peers. Resources stocks weighed on the index after a disappointing set of Chinese Purchasing Managers Index data dragged on commodity prices, CMC Markets analyst Michael Hewson explained.

Beazley was the British index's worst performer, as its shares lost 5.1%, followed by gold-and-silver miner Fresnillo, down 4.4% after missing both 1H revenues and earnings expectations, Hewson noted. Weir led the index’s top risers, closing up 2.15%, after reporting a 1H pre-tax profit increase and nudged its full-year guidance on operating profit toward the upper end of analyst expectations. Hewson added that HSBC shares closed up 1.3% after announcing better-than-expected 1H profits and announcing a $2 billion share buyback.

North America

Most US stocks pulled back Tuesday, reflecting a pause after an extended rally.
The S&P 500 fell 0.3%. The tech-heavy Nasdaq Composite backtracked 0.4%. The Dow Jones Industrial Average rose 0.2%, or 71 points. Canadian stocks closed lower, with the S&P/TSX Composite declining by 0.5%.

Tuesday's losses bucked a recent trend of stock market gains. The S&P 500 has risen for five consecutive months, including a 3.1% gain in July. Investors have grown more optimistic that the Federal Reserve will be able to engineer a so-called soft landing, by bringing inflation to heel while avoiding a significant economic contraction.

The rally began with shares of big technology companies, but has recently expanded to other parts of the market such as industrial and financial stocks. All 11 sectors of the S&P 500 rose in July.

The recent widespread strength is a sign that bearish investors who have been anticipating a recession are starting to buy in, said Jay Woods, chief market strategist at Freedom Capital Markets. "There have been too many people waiting for an obvious selloff that never happened, and now they have to chase performance."

Economic data released Tuesday added to hopes that the US economy can steer clear of the worst-case scenario. Job openings declined slightly from the prior month to a seasonally adjusted 9.6 million in June, the Labor Department said. That is the smallest number of available jobs since April 2021, but still well above pre-pandemic levels.

US manufacturing activity contracted for a ninth consecutive month in July, the Institute for Supply Management said Tuesday. But economic activity within the services sector has remained strong.

Meanwhile, corporate earnings have declined, but not by enough to deflate investor enthusiasm. Second-quarter earnings from S&P 500 companies are down 7.1% from a year earlier, according to a blend of reported results and analyst forecasts provided by FactSet.

But that figure is turning out better than expected: Nearly 83% of companies that have reported earnings have topped Wall Street forecasts, better than the five-year average of 77%. About 58% of S&P 500 companies have already given second-quarter results.

Shares of Caterpillar advanced about 9% Tuesday after the construction-equipment manufacturer said revenue grew 22% in the second quarter. The S&P 500's top performer was network-equipment maker Arista Networks, which rose 20% Tuesday after reporting results Monday afternoon.

"I think overall, earnings have been a little bit more resilient than expected," said Kurt Spieler, chief investment officer at FNBO. "The market at the beginning of the year expected much worse."

Shares of Norwegian Cruise Line Holdings fell 12% after the company reported earnings. Rivals also sold off: Carnival declined 4.5%, while Royal Caribbean fell 1.5%. Spieler said that reflected profit-taking after a strong rally rather than underlying business weakness.

"If you look at that area of the economy, leisure travel is still incredibly strong," he said.