Australia

Australian shares are set to open lower, after all major US indices fell overnight.

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

US stocks slumped on Wednesday after investors received a fresh sign that the US economy could be revving up, fanning inflation fears.

Major indexes all fell, led by the tech-focused Nasdaq Composite's 1.1% slide. Some of the year's best performers suffered the most: Shares of Nvidia and Apple both dropped more than 3%. The losses, however, were broad-based, with everything from shares of real-estate companies to manufacturers and banks falling. Nine of the S&P 500's sectors finished in the red, dragging the benchmark index down 0.7%. The Dow industrials lost 0.6%, or 199 points.

The economy's services sector expanded for an eighth consecutive month in August, according to an Institute for Supply Management index, beating the expectations of economists polled by The Wall Street Journal. Employment, prices and new orders all jumped from the prior month. The resilience of the labor market and consumer spending has complicated the work of central bankers trying to tame inflationary pressures with interest-rate increases.

Investors are growing concerned that if the economy doesn't show signs of drag, inflation will turn higher rather than fall toward the Federal Reserve's targeted level. As rates rise, the availability of higher-yielding alternatives to stocks presses markets, while borrowing is crunched for households and businesses alike.

In commodity markets, Brent crude oil rose 0.6% to US$90.60 a barrel while gold was slightly down at US$1,918.06.

In local bond markets, the yield on Australian 2 Year government bonds were flat at 3.82% while the 10 Year yield was unchanged at 4.13%. US Treasury notes were higher, with the 2 Year yield at 5.02% and the 10 Year yield at 4.28%.

The Australian dollar was higher at 63.85 US cents from its previous close of 63.80. The Wall Street Journal Dollar Index, which tracks the US dollar against 16 other currencies, edged up to 99.28.

Asia

Chinese shares ended mixed as traders weighed expectations of more stimulus against continued concerns of an economic slowdown. Shares of property developers and financial companies helped reverse the Shanghai Composite Index's opening losses, with the benchmark index finishing up 0.1% at 3158.08. Among developers, China Vanke rose 2.1% and Poly Developments gained 2.0%, while in financials Ping An Insurance increased 1.65% and ICBC rose 0.4%. Pharma companies and consumer brands weighed on the market. WuXi AppTec dropped 5.4% and China Tourism Group Duty Free lost 1.3%. Focus is on upcoming economic data, including August trade figures. The Shenzhen Composite Index rose 0.1% and tech-heavy ChiNext Price Index fell 0.5%.

Hong Kong shares closed flat, recovering most of their morning losses thanks to mainland property stocks, which surged on hopes of more property stimulus measures in China. The benchmark Hang Seng Index ended flat at 18449.98. The Hang Seng Mainland Properties Index gained 3.6% after a state media report saying Beijing may roll out new measures to shore up the property sector. China Evergrande Group surged 83%, the stock's biggest percentage gain since listing in 2009. Sunac China surged 68%. Pharmaceutical and consumer stocks weighed on the market. WuXi AppTec lost 6.0% and Anta Sports declined 0.5%.

Japanese stocks ended higher, led by financial stocks following gains in US Treasury yields. Japan Post Bank climbed 2.9% and Sumitomo Mitsui Trust Holdings advanced 2.3%. The Nikkei Stock Average rose 0.6% to 33241.02. Investors are focusing on US services-sector activity data and the Fed's Beige Book due later in the day for their policy implications. The 10-year Japanese government bond yield fell half a basis point to 0.650%.

Indian shares closed higher, rising for a fourth straight session, even as higher crude oil prices revived concerns about inflation and further rate hikes by the US Federal Reserve. Telecommunications stocks led gains. Bharti Airtel rose 1.6% and Indus Towers was up 4.3%. Tata Consumer Products gained 4.0% after a media report it is in talks to buy at least a 51% stake in Indian snack company Haldiram's. Among the stocks on the benchmark index, HDFC Bank gained 1.4%, while Tata Steel declined 1.7%. The benchmark Sensex closed 0.15% higher at 65880.52.

Europe

European stocks dropped after mixed Asia trading and ahead of an expected lower US open. The pan-European Stoxx Europe 600 and CAC 40 retreated about 0.7% and the DAX backtracked 0.5%, with banking, insurance, luxury-goods and food takeaway-delivery shares among the biggest fallers.

The FTSE 100 closed 0.16% lower on Wednesday at 7,426.14 points as the mood in London remains cautious. "It seemed that the FTSE 100 was fated to suffer a sharp down day, but as the session wore on buyers came in to defend the 7400 level," IG analyst Chris Beauchamp says in a market comment. Worries around U.K. inflation and the rise in oil prices, which boost giants BP and Shell, threaten to mess with the Bank of England's plans for the year, the analyst adds. The rise in oil prices makes it more difficult for central banks to find the optimal policy setting that won't make the current situation even worse, CMC Markets UK analyst Michael Hewson writes.

North America

Stocks slumped on Wednesday after investors received a fresh sign that the US economy could be revving up, fanning inflation fears.

Major indexes all fell, led by the tech-focused Nasdaq Composite's 1.1% slide. Some of the year's best performers suffered the most: Shares of Nvidia and Apple both dropped more than 3%. The losses, however, were broad-based, with everything from shares of real-estate companies to manufacturers and banks falling. Nine of the S&P 500's sectors finished in the red, dragging the benchmark index down 0.7%. The Dow industrials lost 0.6%, or 199 points.

The economy's services sector expanded for an eighth consecutive month in August, according to an Institute for Supply Management index, beating the expectations of economists polled by The Wall Street Journal. Employment, prices and new orders all jumped from the prior month. The resilience of the labor market and consumer spending has complicated the work of central bankers trying to tame inflationary pressures with interest-rate increases.

Investors are growing concerned that if the economy doesn't show signs of drag, inflation will turn higher rather than fall toward the Federal Reserve's targeted level. As rates rise, the availability of higher-yielding alternatives to stocks presses markets, while borrowing is crunched for households and businesses alike.

"Our main concern is that the upcoming inflation data accelerates," said Alex McGrath, chief investment officer for Greenville, S.C.-based NorthEnd Private Wealth. "Energy and commodity prices have been climbing for months -- it's the biggest thing that's perked our ears up."

Bond prices fell as yields rose, reflecting fears that interest rates will remain restrictive for longer than investors anticipated. The yield on the benchmark 10-year note rose to 4.289% from 4.267%. The 2-year Treasury yield, which is more sensitive to Fed policy expectations, climbed to 5.022%, from 4.966% on Tuesday.

Wall Street is split on whether the central bank will raise rates again this year. Futures markets show a coin flip between the federal-funds rate staying put between 5.25% and 5.5%, or rising by another 0.25 percentage point by next year, according to CME Group data.

Next week will bring more closely watched inflation readings, with the consumer-price-index and producer-price-index reports due Wednesday and Thursday, respectively. The Fed's latest beige book -- a gathering of economic anecdotes compiled by regional Fed banks -- showed economic malaise cropping up across the country, including built-up savings from pandemic stimulus beginning to run out, hiring slowing and delinquencies rising to prepandemic levels.

Crude prices climbed further to 10-month highs after Saudi Arabia and Russia surprised many investors by curtailing oil output on Tuesday. Airlines are warning that fuel costs are eating into profits, with shares of Southwest Airlines falling 2.6%. That is a sign that rising commodity prices are beginning to affect the economy, according to McGrath, who sees the Fed hiking rates once more this year.

While the economy continues to run hot, some investors said stocks stand to benefit as worries about a severe recession fade. This year's rally lost steam in August, and the three major US indexes haven't made much progress in the past two months.

"The stock market has been running in place, waiting to see the light at the end of the tunnel," said Randy Gwirtzman, a portfolio manager at Baron Capital. "Obviously, you hope it's not an incoming train."

Gwirtzman, who runs a fund focused on small-cap stocks with high growth potential, says a record amount of cash on the sideline could come in to support stocks as well, helping set up a rally.

Elsewhere, renewed Fed-hike fears have lifted the dollar. Japan's yen hit a 10-month low against the greenback, putting traders on alert for more intervention by Tokyo. Japan's Nikkei stock index rose, while European shares fell.

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