Australia

Australian shares are positioned to open lower as a bond sell-off on Wall Street wiped out gain US market gains. US yields were boosted amid upbeat job data and rate-hike speculation.

ASX futures were down 0.5% or 35 points as of 8:00am on Wednesday, suggesting a lower open.

An intensifying bond selloff sparked new losses on Wall Street on Tuesday, wiping out what was left of the Dow Jones Industrial Average's gain for the year and pushing the yields on U.S. Treasurys to fresh multiyear highs.

The losses were broad, with risky technology firms, rate-sensitive banks and real-estate owners and companies that rely on discretionary spending leading the way lower. Utility shares were the only industry segment in the S&P 500 to rise. They added 1.2%, bouncing off big losses Monday.

The Dow shed about 431 points, or 1.3%, and the blue-chip stock index ended the session down 0.4% so far in 2023. The S&P 500 declined 1.4%, with nearly 13% of the stocks in the index hitting new 52-week lows. The technology-skewed Nasdaq Composite fell 1.9%.

In commodity markets, Brent crude oil rose 0.4% to US$91.03 a barrel while gold was flat at US$1,823.05.

In local bond markets, the yield on Australian 2 Year government bonds was up at 4.09% while the 10 Year yield was also up at 4.54%. US Treasury notes were higher, with the 2 Year yield at 5.15% and the 10 Year yield at 4.80%.

The Australian dollar was lower at 63.01 US cents from its previous close of 63.60 US cents. The Wall Street Journal Dollar Index, which tracks the US dollar against 16 other currencies, was flat at 100.78.

Asia

Markets in mainland China are closed this week for a holiday.

Hong Kong shares fell after trading resumed following the National Day holiday, dragged by property stocks. The Hang Seng Index closed 2.7% lower at 17331.22, while the Hang Seng Mainland Properties Index fell 3.6%. Without significant property policies from Beijing, any "share price rally of developers, if any, will not be sustainable," Nomura analyst Jizhou Dong said in a note. Longfor Group and Country Garden dropped 6.5% and 7.05%, respectively. New World Development plunged to a 20-year low at midday and closed 5.25% lower.Auto dealer Zhongsheng Group led losses on the index, down 7.9%. Among tech stocks, JD Health dropped 4.7% and Meituan lost 4%. The only gainer on the HSI was AIA, which advanced 0.9%.

Japanese stocks ended broadly lower, dragged by falls in energy and auto stocks as concerns about the scope of policy tightening by central banks and higher borrowing costs persist. Mazda Motor dropped 6.0% and Nissan Motor lost 5.0%. Inpex shed 6.5% and Japan Petroleum Exploration slid 5.9% following drops in crude-oil prices. The Nikkei Stock Average fell 1.6% to 31237.94. Investors are focusing on economic data and their policy implications. The 10-year Japanese government bond yield falls 1.5 basis points to 0.755%.

India's benchmark Sensex fell 0.5% to close at 65512.10, dragged lower by losses in auto and financial stocks. Higher bond yields and a stronger dollar have helped keep investors on the back foot, says Michael Hewson, chief market analyst at CMC Markets, in an email. Also, fresh remarks from some Fed officials have made the case for further rate increases, Hewson adds. Maruti Suzuki India slipped 2.5% and Tata Motors dropped 1.6%, while ICICI Bank shed 1.2% and HDFC Bank was down 1.2%. Meanwhile, Vedanta rose 3.7%, following its plan to break up into six listed entities.

Europe

European stocks dropped and US markets fell as upbeat US job data boosted US bond yields and rate-hike speculation. The Stoxx Europe 600, CAC 40 and DAX dropped about 1% and the FTSE 100 backtracked 0.5%, with property companies among the biggest fallers. Brent crude rose 0.9% to $91.53 a barrel. The US economy continues to do better than expected, Lazard says. "Today's job openings imply 1.5 open jobs per unemployed person, despite the sharpest monetary-policy tightening for decades," Lazard's chief market strategist Ronald Temple writes. "I believe the Fed's rate-hike cycle is likely over, but data like today's pose the risk that one more hike might be needed."

The FTSE 100 closed down 0.5% on Tuesday after the latest U.S. jobs data prompted another spike in yields. "We've had another day where rising U.S. yields have continued to exert downward pressure on stock markets," CMC Markets' chief analyst Michael Hewson says in a market comment. The London blue-chip index slipped to a three-week low over growth and interest rate concerns, while speculation abounds that the Bank of Japan intervened to push the dollar vs yen back below 150.000 after U.S. yields pushed higher on the August jobs numbers, Hewson says. It closed down 7,470.16 points.

North America

An intensifying bond selloff sparked new losses on Wall Street on Tuesday, wiping out what was left of the Dow Jones Industrial Average's gain for the year and pushing the yields on U.S. Treasurys to fresh multiyear highs.

The losses were broad, with risky technology firms, rate-sensitive banks and real-estate owners and companies that rely on discretionary spending leading the way lower. Utility shares were the only industry segment in the S&P 500 to rise. They added 1.2%, bouncing off big losses Monday.

The Dow shed about 431 points, or 1.3%, and the blue-chip stock index ended the session down 0.4% so far in 2023. The S&P 500 declined 1.4%, with nearly 13% of the stocks in the index hitting new 52-week lows. The technology-skewed Nasdaq Composite fell 1.9%.

Meanwhile, the yield on the 10-year Treasury note exceeded 4.8% for the first time since August 2007, ending Tuesday at 4.801%. Two-year note yields rose to 5.148% and the payout on 30-year bonds hit 4.936%.

Besides luring yield-seeking investors away from dividend-paying stocks, Treasury yields that are so comfortably above the rate of inflation—so-called real yields—are likely to weigh heavily on companies' results and pressure their shares, said Mabrouk Chetouane, head of global market strategy at Natixis Investment Managers.

"If real interest rates continue to increase in the next weeks, we could see real damage in the equity markets," he said. "They will all suffer from the cost of capital."

Wary of plunging stocks and getting locked into lower-yielding bonds, Natixis, which manages more than $1.2 trillion, has recently boosted the proportion of its portfolio that is held in cash, Chetouane said.

Investors around the world are hoarding cash, which is paying around 5.5% in money-market funds and via short-term Treasury bills. Even well-known bond trader and DoubleLine Chief Executive Jeffrey Gundlach advocated a strategy of "T-Bill and Chill" at the Grant's investment conference in New York on Tuesday.

Jerry Braakman, chief investment officer of First American Trust of Santa Ana, Calif., said he has been looking for bargains among healthcare and energy stocks, which trade at lower prices relative to future earnings than the big technology stocks that had fueled this year's rally. But the firm has also beefed up its allocation to cash.

"Cash pays you at the moment and keeps some dry powder to buy into a equity-market swoon," he said. "No one gets fired for holding cash."

Employment data Tuesday showed job openings increased to 9.6 million in August, from 8.9 million in July, a sign that the labor market remains resilient in the face of the Federal Reserve's efforts to cool the economy and ease inflation with higher interest rates.

The Labor Department's jobs report on Friday could convince investors that further rate increases are in store this year unless the data are surprisingly weak, said Ed Moya, senior market analyst at trading firm Oanda.

A pair of corporate spin offs that made their debuts this week led the market lower on Tuesday.

Investors continued to dump shares of WK Kellogg following the cereal maker's spin off of its snacks business into a separate public company, Kellanova. The maker of Froot Loops and Frosted Mini Wheats dropped 16%.

The shares have lost 23% in the two sessions that they have traded separately from the business that sells Pringles and Rice Krispies Treats. The snack spinoff's shares have declined 5.1% since their debut.

Veralto, which had been the environmental business of life-sciences firm Danaher, fell 9.5%.

Another big loser was spice company McCormick, which dropped 8.5% after reporting fiscal third-quarter sales that disappointed investors. The producer of Cholula hot sauce and French's mustard blamed lower sales volume on a slower-than-expected economic recovery in China, exiting from a business in Russia and selling off low-margin units.

A bright spot, Chief Executive Brendan Foley said, is growing market share for its Super Deal herbs and spices as shoppers look to save money by buying in bulk. "Our household penetration on larger sizes is greater than pre-Covid," he said.

Overseas stocks fell, too, on Tuesday. The Stoxx Europe 600 index and Germany's Dax both declined 1.1%. Japan's Nikkei 225 Index lost 1.6% and Hong Kong's Hang Seng tumbled 2.7%. Markets in mainland China are closed this week for a holiday.