Australia

Australian shares are set to open lower Wednesday after a mostly weaker session on Wall Street.

ASX futures were pointing 0.7% lower heading into the shortened trading week.

US stocks finished mostly lower on Tuesday, as traders returned from the long holiday weekend and assessed the possible impact of China loosening its Covid-19 protocols on the global economy as central banks continue to battle inflation.

The S&P 500 fell 0.4%, the Nasdaq Composite shed 1.4%, while the Dow Jones Industrial Average gained 0.1%.

In commodity markets, Brent crude oil gained 0.81% to $US84.60 a barrel while gold edged up 0.83% to US$1,813.16

In local bond markets, the yield on Australian 2 Year government bonds remain flat at 3.25% while the 10 Year sits at 3.82%. Overseas, the yield on 2 Year US Treasury notes sits at 4.39% and the yield on 10 Year US Treasury notes climbed to 3.85%.

The Australian dollar hit 67.31 US cents up from the previous close of 66.25.

Asia

Stock indexes in Asia rose, with the Shanghai Composite Index up 1%. Hong Kong's market was closed for a public holiday on Tuesday.

"China is front and center for markets right now," said Hani Redha, a portfolio manager at PineBridge Investments. "Without this, it was pretty clear to us we'd get a pretty broad global recession. Now, with China moving in the opposite direction, you can dampen that."

Europe

UK markets were shut for a public holiday on Tuesday, with the British FTSE 100 ending Friday slightly higher.

The pan-European Stoxx Europe 600 index closed 0.1% higher at 428.00, led by gains in oil-linked stocks as crude oil prices rise. Germany's DAX rose 0.4% and France's CAC-40 gained 0.7%

North America

US stock indexes were mixed after China said it would open its borders next month, bolstering investors' hopes that the thawing of the world's second-largest economy will support global growth. Bond yields climbed.

China has maintained some of the world's most-restrictive coronavirus lockdown measures, slowing its economy significantly. Plans to lift Covid-19 quarantine requirements on international arrivals early in January could boost China's economy as travel resumes.

This could support the global economy at a time when many nations have lifted interest rates in an effort to tame inflation. The Federal Reserve has signaled plans to raise rates through the spring.

Still, Covid-19 is spreading rapidly in China as the country reopens, prompting reports of overcrowded hospitals and inundated crematoriums. Investors are weighing the impacts of the outbreak with what the reopening will mean for the global economy over the longer term.

"China has really gone full force into abandoning zero Covid and there are going to be some growing pains with that effort," said Michael Reynolds, vice president of investment strategy at Glenmede. "The explosion in case counts there is probably going to be economically disruptive to the downside for them."

Tesla, which this weekend extended a shutdown of its Shanghai manufacturing plant amid the outbreak, was the S&P 500's worst performer Tuesday. Tesla stock, currently down for seven consecutive sessions including Tuesday's, fell 8.4% around midday. The electric-vehicle maker's shares are off more than 40% in December.

Disruptions related to the virus's spread in China pose a risk to U.S. companies, said Louis Navellier, chief investment officer of money-management firm Navellier & Associates.

"Companies with heavy China exposure have a cloud over them for the moment," said Mr. Navellier.