Australia

Australian shares are set to edge down today following another weak session on Wall Street. All three major US indices were set to close in the red near the end of trade on Monday.

US stocks slipped near the end of trade on Monday, dragged by shares of everything from banks to technology companies.

The S&P 500 fell 1.3%, while the Dow Jones Industrial Average was down about 319 points, or 1%. The technology-heavy Nasdaq Composite dropped 1.7%.

Stocks are on track to end December lower, a somewhat unusual occurrence. The S&P 500 has risen in 73% of Decembers since 1928, according to Dow Jones Market Data. As of Friday's close, the S&P 500 had fallen 5.6% so far this month.

Investors say markets have faced pressure from a variety of factors. Central bankers around the world have warned they will have to hold interest rates at higher levels for longer despite recent progress in the fight against inflation. Data on US retail sales has fueled some concerns that consumers are beginning to feel the bite of high borrowing costs and inflation.

A surge in Covid-19 cases in China has raised questions about its recent loosening of pandemic restrictions, too.

In commodity markets, Brent crude oil added 1.05% to $US79.87 a barrel, while gold dropped 0.35% to US$1,786.86.

In local bond markets, the yield on Australian 2 Year government bonds rose to 3.16% while the 10 Year climbed to 3.53%. Overseas, the yield on 2 Year US Treasury notes declined to 4.25% and the yield on the 10 Year US Treasury notes fell to 3.58%.

The Australian dollar hit 66.93 US cents up from the previous close of 66.83. The Wall Street Journal Dollar Index, which tracks the US dollar against 16 other currencies, edged down to 97.86.

Asia

Chinese shares ended lower, with the Shanghai Composite Index dropping below the 3100 level during the session.

"Asian markets have turned a tad introspective after a massive reopening bounce gave way to reality-check trading as investors came to grips with numerous zero-Covid offramp issues, least of all the scary surge in Mainland Covid cases," said Stephen Innes, managing partner of SPI Asset Management.

Consumption related companies and pharmaceutical sectors, the two biggest winners after Covid-related restrictions were eased, weighed on the market. Shanghai Fosun Pharmaceutical fell by 7.1% and Shanghai Jahwa United dropped 2.5%. The education sector was one of the only highlights during the trading day, with Xueda (Xiamen) Education Technology Group rising by 2.6%. The Shanghai Composite Index declined 1.9% to 3107.12, the Shenzhen Composite Index dropped 1.8% and the ChiNext Price Index was 1.1% lower.

Japanese stocks ended lower, dragged by falls in electronics and auto shares, as caution continued about the global economic outlook amid policy tightening by central banks. Lasertec dropped 4.1% and Inpex lost 2.9%. Toshiba Corp. slumped 6.9% following a report that a group led by Japan Industrial Partners may cut the valuation for a possible buyout. The Nikkei Stock Average fell 1.1% to 27237.64. Investors are focusing on the Bank of Japan's policy meeting outcome Tuesday.

Hong Kong's Hang Seng Index ended 0.6% lower at 19352.81 as the market turned down following a rally fueled by the reopening of the city and of China. Pharmaceutical sectors and online healthcare platforms erased previous gains, with Alibaba Health Information Technology dropping 8.2% and Shanghai Fosun Pharmaceutical shedding 7.0%. Vaccine producer Cansino Biologics slid 16%. Analysts expect the reopening optimism to be offset by the surge of Covid cases across China, which could hamper the economy before it fully rebounds. Chinese education companies led the gainers, with New Oriental Education rising 7.0% as Beijing vowed to provide more support to boost the sector.

Europe

European stocks rallied as investors stayed upbeat despite losses in Asian markets and lingering economic concerns. The pan-European Stoxx Europe 600 and the German DAX both added 0.36%, the FTSE 100 advanced 0.4% and the French CAC 40 climbed 0.32%.

"While there's still scope for a rally into Christmas, this looks to be a fleeting bout of optimism, as worries about falling earnings and a recession in 2023 continue to stalk markets," IG analysts wrote.

The UK economy looks set to shrink next year as rising food prices and wage costs fuel inflation, HSBC says. The economy is likely to contract in the first two quarters of the year, resulting in an overall 0.5% fall in GDP in 2023, followed by a 1.3% rise in 2024, HSBC says.

Meanwhile, while November's annual inflation dropped to 10.7%--from 11.1% year-on-year in October--food prices and the impact of wage costs remain worrying, HSBC says.

"We still see headline CPI inflation ending 2023 at 5.3% and 2024 at 3.2%," HSBC senior economist Elizabeth Martins writes, adding that the Bank of England looks likely to raise interest rates at least once more, by 0.25 percentage points to 3.75%, in February.

Corporate lending in Germany will cool off in 2023, after an almost unprecedented surge in recent months, Deutsche Bank analyst Jan Schildbach wrote in a 2023 outlook note. The impact of inflation, rising interest rates, uncertainties surrounding Ukraine and China, and the impact of the energy crisis in Germany, meant a massive jump in lending by public development banks to energy firms, he says. That has led to a the first double-digit--10.5%--on-year increase in loan volumes to nonfinancial companies and self-employed people since reunification, said Schildbach. However, 2022 was unique and uncertainty should recede by summer, allowing firms to reduce their enormous liquidity buffers, he explained. Inflation should also have peaked, with firms able to pass on higher costs to customers, lowering pressure on margins, he added.

North America

US stocks slipped near the end of trade on Monday, dragged by shares of everything from banks to technology companies.

The S&P 500 fell 1.3%, while the Dow Jones Industrial Average was down about 319 points, or 1%. The technology-heavy Nasdaq Composite dropped 1.7%.

Stocks are on track to end December lower, a somewhat unusual occurrence. The S&P 500 has risen in 73% of Decembers since 1928, according to Dow Jones Market Data. As of Friday's close, the S&P 500 had fallen 5.6% so far this month.

Investors say markets have faced pressure from a variety of factors. Central bankers around the world have warned they will have to hold interest rates at higher levels for longer despite recent progress in the fight against inflation. Data on US retail sales has fueled some concerns that consumers are beginning to feel the bite of high borrowing costs and inflation.

A surge in Covid-19 cases in China has raised questions about its recent loosening of pandemic restrictions, too.

"There's still so much concern overhanging markets about the never-ending Covid story and the worries about a hard landing due to rate hikes," said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown. "Even if we do get a year-end rally, it will fizzle out because those concerns are still there."

Stocks fell broadly Monday, with all 11 sectors of the S&P 500 on track to end the day lower.

Facebook parent Meta Platforms slipped 3.8% after the European Union charged it with antitrust violations linked to its Marketplace service.

Walt Disney shares fell 4.2% after the company's latest film, "Avatar: The Way of Water," generated less money than expected in its debut weekend.