Australia

Australian shares are set to edge lower following a dip on Wall Street. Investors weigh uncertainty between future interest rate hikes and China’s potential economic reopening.

ASX futures were down 47 points or 0.6% at 7245 as of 7:00am on Wednesday, pointing to a slip at the open.

US stock indices extended declines Tuesday as investors weighed fears about the outlook for interest rates against optimism surrounding China's reopening.

In late afternoon trading, the S&P 500 dropped 2%, while the Dow Jones Industrial Average fell 500 points, or 1.5%, and the technology-heavy Nasdaq Composite slid 2.5%.

The moves came after the S&P 500 index fell for the third consecutive day Monday, when stronger-than-expected US economic data had raised fears that the Federal Reserve will keep interest rates higher for longer to cool the economy and bring down inflation.

The stock market rallied throughout November on signs that the Fed was winning the fight against inflation, which lifted hopes that interest-rate increases would slow. December has gotten off to a rockier start as investors have been confronted with an unusual problem: The US economy is proving stronger than expected.

US economic data has tended to beat expectations, a strength that could exacerbate inflation and in turn, prompt Fed officials to raise interest rates to higher-than-expected levels and keep them there for longer.

In commodity markets, Brent crude oil slipped 3.91% to $US79.45 a barrel, gold rose 0.16% to US$1,771.56.

In local bond markets, the yield on Australian 2 Year government bonds rose to 3.06% while the 10 Year also rose to 3.39%. Overseas, the yield on 2 Year US Treasury notes declined to 4.35% and the yield on the 10 Year US Treasury notes was down at 3.51%.

The Australian dollar hit 66.9 US cents down from the previous close of 66.97. The Wall Street Journal Dollar Index, which tracks the US dollar against 16 other currencies edged higher to 98.37.

Asia

Mainland Chinese shares ended broadly higher as investor sentiment continued to be boosted by hopes of reopening. Liquor-makers and consumer-related companies led the gains. Index heavyweight Kweichow Moutai rose 1.4% and Wuliangye Yibin Co. gained 4.0%. Dairy producer Inner Mongolia Yili Industrial Group advanced 1.8% and Foshan Haitian Flavouring & Food Co. rose 4.6%. Telecommunications and state-owned infrastructure stocks weighed on the market with China State Construction Engineering falling 2.3%. The Shanghai Composite Index ended flat at 3212.53, the Shenzhen Composite Index rose 0.3%, and the ChiNext Price Index closed 0.7% higher.

Hong Kong stocks ended lower, as investors took profit after the previous day's rally. The benchmark Hang Seng Index dropped 0.4% to settle at 19441.18 after a 4.5% jump the past session on China Covid reopening hopes. KGI analyst Kenny Wen reckons the market may see more rounds of such ups and downs, as China prepares for an eventual reopening, with investors shifting between profit-taking and buying on dips. Chinese drug makers, which were among Monday's top performers, pulled back from earlier gains to lead losses. CSPC Pharma shed 8.6% and Wuxi Biologics lost 3.5%.

Japanese stocks ended higher, led by gains in insurance and trading companies, thanks in part to higher US Treasury yields and a weaker yen. Dai-ichi Life Holdings climbed 2.4% and Mitsui & Co. gained 2.0%. The Nikkei Stock Average rose 0.2% to 27885.87.

Europe

European stocks closed lower amid downbeat Wall Street trading as the US interest-rate outlook continues to cause uncertainty.

"Having seen decent gains in the last few weeks, there appears to be little appetite to drive markets much higher in the short term," CMC Markets analyst Michael Hewson wrote.

The pan-European Stoxx Europe 600 and British FTSE retreated about 0.6%, the French CAC 40 backtracked 0.1% and the German DAX fell 0.7%.

Meanwhile, in a late-afternoon announcement, European plane manufacturer Airbus said it was unlikely to hit its target of "around 700" commercial aircraft deliveries in 2022, though it doesn't expect deliveries to fall materially short of that. Airbus shares closed 0.5% higher.

North America

US stock indices extended declines Tuesday as investors weighed fears about the outlook for interest rates against optimism surrounding China's reopening.

In late afternoon trading, the S&P 500 dropped 2%, while the Dow Jones Industrial Average fell 500 points, or 1.5%, and the technology-heavy Nasdaq Composite slid 2.5%.

The moves came after the S&P 500 index fell for the third consecutive day Monday, when stronger-than-expected US economic data had raised fears that the Federal Reserve will keep interest rates higher for longer to cool the economy and bring down inflation.

The stock market rallied throughout November on signs that the Fed was winning the fight against inflation, which lifted hopes that interest-rate increases would slow. December has gotten off to a rockier start as investors have been confronted with an unusual problem: The US economy is proving stronger than expected.

US economic data has tended to beat expectations, a strength that could exacerbate inflation and in turn, prompt Fed officials to raise interest rates to higher-than-expected levels and keep them there for longer.

"The economy continues to show a degree of strength that I think was not expected," said David Donabedian, chief investment officer at CIBC Private Wealth US. "The consumer is hanging in there quite well, jobs continue to be added, wage growth is significant and consumers are still spending."

Meanwhile, signs that China is moving toward reopening its economy -- following years of Covid-19 lockdowns that have weighed on growth -- are spurring optimism that has lifted Asian stock indices. Major Chinese cities have begun easing some lockdown measures while Communist Party-linked media has acknowledged protests against the unpopular measures.

"China reopening I thought was a head fake, but it feels like this time it's for real," said Altaf Kassam, head of investment strategy for Europe, the Middle East and Africa at State Street Global Advisors. "They are putting their ducks in a row. It isn't going to happen tomorrow, it isn't going to happen this year, but when it comes, it could be very powerful" for equity markets.

Every sector in the S&P 500 traded lower Tuesday. NRG Energy led declines, tumbling 17% after the company said it agreed to buy Vivint Smart Home for $2.8 billion in cash.

Textron was the best large-cap performer. The industrial firm rose 4% after winning a US Army helicopter contract.