Australia

Australian shares are heading lower this morning after Wall Street suffered on Thursday. Investors interpreted positive US GDP data and strong Q2 corporate earnings as troublesome news for the fight against inflation. Meanwhile, the European Central Bank followed the Federal Reserve in raising interest rates another 0.25%.

ASX futures were 50 points or 0.7% lower as of 6:00am on Friday, suggesting losses at the open.

US stocks fell on Thursday, with the Dow Jones Industrial Average ending a streak of 13 consecutive winning sessions.

The Dow's run of gains was the longest since 1987 and the second-longest on record. The blue-chip index fell 237 points on Thursday, or 0.7%. The S&P 500 fell 0.6%, while the tech-heavy Nasdaq Composite dropped 0.5%. Stocks were in the green for much of the session, losing steam in the afternoon. Canadian shares also backtracked, with the S&P/TSX Composite closing down 0.9%.

Major US indices were little changed for the week, as investors weighed continued economic strength and stronger earnings than many on Wall Street had expected.

The possibility of a sharp economic slowdown has been a long-running concern for investors, as the Federal Reserve has raised interest rates to their highest level in 22 years. The Fed moved rates a quarter percentage point higher on Wednesday, and Chair Jerome Powell said the central bank's next steps will depend on how the economy fares in coming months.

In commodity markets, Brent crude oil increased 1.2% to US$83.89 a barrel while gold dropped 1.4% to US$1,943.89.

Australian government bonds were lower, with the 2 Year yield falling to 3.86% and the 10 Year yield declining to 3.92%. US Treasury notes were higher, with the 2 Year yield rising to 4.93% and the 10 Year yield climbing to 4.00%.

The Australian dollar stumbled to 66.98 US cents from its previous close of 67.57. The Wall Street Journal Dollar Index, which tracks the US dollar against 16 other currencies, leaned higher to 96.16.

Asia

Chinese shares ended lower, reversing the session's earlier gains as sentiment remained fragile amid expectations for Beijing to announce substantial policy easing. Chip makers led the losses with Semiconductor Manufacturing International Corp. falling 1.5% following the passage of a bill by the US Senate to increase oversight of investments in Chinese technology. Property developers also declined with China Vanke dropping 0.9% and Seazen Holdings falling 1.2%. Among the gainers were automakers, on news that Volkswagen has invested $700 million in Chinese EV maker XPeng. SAIC Motor Corp. added 1.5% and Huayu Automotive Systems gained 3.7%. The benchmark Shanghai Composite Index closed 0.2% lower at 3216.67. The Shenzhen Composite Index declined 0.5% and the tech-heavy ChiNext Price Index ended 0.3% lower.

Hong Kong stocks ended the session higher, sustaining the market’s recent momentum as investors remained enthusiastic about Beijing's latest promises of policy stimulus. The benchmark Hang Seng Index rose 1.4% to settle at 19639.11. Property developers led the gainers, as the sector resumed its rally after a brief pull-back in the previous session. Country Garden jumped 12% and Longfor was up 5.2%. Auto makers further supported the market, as Geely gained 8.6% and Nio advanced 12%. XPeng surged 34% after unveiling an equity investment from Volkswagen.

Japanese stocks ended higher, led by gains in game and real estate shares, as hopes for domestic earnings growth continued despite the US central bank's latest decision to lift rates. Capcom climbed 15% after its 1Q net profit more than doubled on year. Konami Group gained 1.9% and Sumitomo Realty & Development advanced 2.1%. The Nikkei Stock Average rose 0.7% to 32891.16.

The Sensex index of India fell 0.7% to close at 66266.82, reversing earlier gains, amid cautious sentiment. Inflation risks cannot be completely ruled out, given that a commodities rally is returning, which could bring back goods inflation, Charu Chanana, market strategist at Saxo Markets, said in a commentary. A mixed bag of companies led losses on the Indian benchmark, with Mahindra & Mahindra losing 6.4%, Tech Mahindra dropping 3.8% and Nestle India shedding 2.1%. Meanwhile, Jindal Stainless rose 1.1% after its 1Q net profit climbed 50% on year.

Europe

European stocks gained after the European Central Bank increased eurozone interest rates by 0.25 percentage points, but sounded a cautious note on future rate rises. The pan-European Stoxx Europe 600 advanced 1.4%, the German DAX added 1.7% and the French CAC 40 surged 2.1%

"The ECB followed in the Federal Reserve's footsteps today, hiking rates by 25 basis points to 4.25%," Alex Livingstone at Titan Asset Management wrote. "However, the language in the statement struck a more dovish tone than markets anticipated as the ECB gestured to clearer signs of inflation easing and admission of tightening financial conditions weighing on demand. This is a clear nod to economic growth becoming a more important topic of focus."

The United Kingdom’s FTSE 100 Index closed Thursday up 0.2% to 7692 points, in line with global markets as the ECB's dovish hike boosted sentiment, IG Group chief market analyst Chris Beauchamp said in a note. "Far from pouring cold water on the rally, Christine Lagarde has energised it anew with hints that the ECB's rate hike campaign could actually be at an end," he added.

The Bank of England is likely to follow the Fed’s and the ECB's tone, which could support UK stocks next week, Beauchamp added. Centrica shares outperformed the British benchmark, rising 7.5% after reporting strong 1H profits, followed by RELX and Informa, up 4.7% and 4.1%, respectively.

North America

US stocks fell on Thursday, with the Dow Jones Industrial Average ending a streak of 13 consecutive winning sessions.

The Dow's run of gains was the longest since 1987 and the second-longest on record. The blue-chip index fell 237 points on Thursday, or 0.7%. The S&P 500 fell 0.6%, while the tech-heavy Nasdaq Composite dropped 0.5%. Stocks were in the green for much of the session, losing steam in the afternoon. Canadian shares also backtracked, with the S&P/TSX Composite closing down 0.9%.

Major US indices were little changed for the week, as investors weighed continued economic strength and stronger earnings than many on Wall Street had expected.

The possibility of a sharp economic slowdown has been a long-running concern for investors, as the Federal Reserve has raised interest rates to their highest level in 22 years. The Fed moved rates a quarter percentage point higher on Wednesday, and Chair Jerome Powell said the central bank's next steps will depend on how the economy fares in coming months.

But the US economy has so far steered well clear of a recession. Gross domestic product grew 2.4% in the second quarter, the Commerce Department said Thursday. That was more than economists had expected and a higher rate than the first quarter's 2% expansion.

Investors are betting that the Fed's campaign to raise rates may continue if inflation remains sticky. "Our own view is that Fed rates have peaked," said Seema Shah, chief global strategist at Principal Asset Management. But with rising commodity prices and a low unemployment rate, she said, "we can't entirely rule out the possibility of an inflation resurgence lurking around the corner."

Foreign central bankers are also tightening monetary policy. The European Central Bank raised rates another quarter point on Thursday. The Bank of Japan, which has bucked the global tightening trend, is discussing whether to tweak its yield-curve control policy to let long-term rates rise beyond its 0.5% cap.

Still, stocks are up significantly this year. "We raise rates, the nose is still up on the proverbial plane," said Ken Mahoney, CEO of Mahoney Asset Management. "The opportunity cost to sit on the sidelines and complain about a recession that hasn't happened is significant."

The economic data has been accompanied by solid corporate earnings from big companies in key sectors. Meta Platforms shares rose 4.4% Thursday after reporting its highest quarterly sales growth since 2021. McDonald's gained 1.2% on stronger-than-expected sales and profit, while shares of Invisalign maker Align Technology advanced 13%.

Royal Caribbean Group gained 8.7%. Southwest Airlines fell 8.9% after the carrier said it would revamp its flight schedule.

Overall, second-quarter profits from S&P 500 companies are down about 8% from a year ago, according to a blend of reported results and consensus estimates. However, 80% of companies have so far topped Wall Street profit expectations, a slightly higher rate than average. About 44% of S&P 500 companies have reported as of Thursday morning, according to FactSet.

The earnings season "has provided more confirmation of the soft landing hypothesis," or the belief that the economy will avoid a sharp slowdown, said Nick Anderson, portfolio manager at Thornburg Investment Management. He cited signs of strong consumer spending and falling inflation in earnings from major credit card companies, and rebounding demand for cloud computing services sold by big tech firms.