Australia

Australian shares are set to jump after Wall Street notched its best day in three weeks as investors weighed the earnings outlook.

ASX futures were up 79 points or 1.2% at 6626 as of 8.00am on Wednesday, pointing to a surge at the open.

Overseas, the S&P 500 added 2.8%. The tech-focused Nasdaq Composite gained 3.1%, and the Dow Jones Industrial Average rose 2.4%. All three indexes logged their biggest one-day point and percentage gains since June 24. They have risen more than 6% from their lows in mid-June but remain down sharply for the year.

Investors are parsing earnings reports to determine how decades-high inflation is affecting corporate profits and consumer spending. Bank earnings are widely held as a good way to determine the path of the broader economy, since their businesses closely track the health of consumers and businesses. Bank of America Chief Executive Brian Moynihan said on the bank's earnings call earlier this week that its customers' resilience and health remain strong.

"When you look at what's happening in the real economy through the lens of our customers, I'd say it's less than 50/50 that we end up with a recession at this point," said Bruce Van Saun, CEO of Citizens Financial Group, which reported earnings that beat expectations Tuesday.

Locally, the S&P/ASX 200 closed 0.6% lower at 6649.6 on Tuesday, weighed by losses in nearly every sector. The benchmark index opened slightly lower following a weak lead from US equities and steadily drifted downwards through the session.

The tech and health sectors led declines in percentage terms, with device manufacturers ResMed and Cochlear giving up 4.6% and 4.8%, respectively.

Block, WiseTech and Xero fell by between 2.9% and 6.0% as the tech sector gave back the gains made the previous session.

Financial stocks closed flat as gains by Commonwealth, Westpac and NAB were offset by weakness in wealth managers.

The energy and utilities sectors put on 2.45% and 1.0%, respectively, amid higher oil prices.

In commodity markets, Iron ore fell 2.2% to US$105.26, Brent crude oil gained 1% to US$107.34, while gold edged down 0.1% to US$1709.60.

In local bond markets, the yield on Australian 2 Year government bonds advanced to 2.72% while the 10 Year gained to 3.50%. Overseas, the yield on 2 Year US Treasury notes settled at 3.24% and the yield on the 10 Year US Treasury notes rose to 3.02%.

The Australian dollar rose to 68.96 US cents up from the previous close of 68.09. The Wall Street Journal Dollar Index, which tracks the US dollar against 16 other currencies fell slightly to 98.78.

Asia

China stocks are lower early in morning trade, weighed down by auto shares. The benchmark Shanghai Composite Index drops 0.2% to 3270.52, the Shenzhen Composite Index declines 0.2% to 2187.64 and the ChiNext Price Index falls 0.7% to 2780.01. Auto stocks are lower amid concerns that China's rising number of Covid-19 cases could hurt demand for cars and hit production. BYD Co. falls 1.6% and SAIC Motor slips 0.2%. The property market will likely be in focus, following reports that China may allow suspending mortgage payments on stalled property projects amid protests, Commerzbank analysts say in a note. As the property sector accounts for at least 20% of GDP, stabilizing it will remain an important determinant of China's economic health in 2H, they add.

Hong Kong's benchmark Hang Seng Index ended 0.9% lower at 20661.06, underperforming regional equities as consumer-related and tech stocks dragged. Electronics shares were sold off, with Apple suppliers BYD Electronic down 8.9%, Sunny Optical losing 3.7% and AAC Technologies sliding 3.1% after a media report that the US tech giant will slow hiring. In the tech sector, Alibaba Group lost 2.9%, Meituan dropped 0.3% but Tencent Holdings added 0.2%. Among gainers, Wuxi Biologics rose 1.6% after forecasting a 35%-37% rise in 1H net profit. Chinese oil majors extended Monday's gains, tracking higher oil prices, with Cnooc, Sinopec and PetroChina up 0.3%-1.1%.

Japanese stocks ended higher, led by gains in electronics and shipping stocks, as hopes continued for an earnings recovery from the Covid-19 pandemic and as concerns eased somewhat about costs of operations. Yaskawa Electric climbed 3.6% and major shipper Mitsui O.S.K. Lines gained 3.9%. The Nikkei Stock Average rose 0.6% at 26961.68. Investors are focusing on the earnings season set to start later this week.

Europe

European markets rose on the back of reports that a shuttered European gas pipeline could re-open on Thursday as planned, easing energy-supply fears. The pan-European Stoxx Europe 600, and French CAC 40 gained more than 1% and the German DAX was up 2.7%.

"For Europe, the big risk has been whether Russia would turn the Nord Stream 1 gas pipeline back on after scheduled maintenance," IG analyst Joshua Mahony writes. "However, the latest rumour that the gas will indeed flow once again has provided a welcome boost for European indices, despite uncertainty over quantity."

The European Central Bank is expected to raise interest rates for the first time in 11 years at its meeting Thursday. Typically, interest-rate increases cause currencies to strengthen because investors are paid more to invest in those assets.

Officials are expected to discuss raising interest rates by half a percentage point, The Wall Street Journal reported. Economists, though, still expect a quarter-percentage-point increase, in line with what ECB President Christine Legarde has signalled.

London’s FTSE 100 rose 1.01%.

North America

US stock indexes recorded their biggest one-day gains in nearly a month Tuesday, as investors reacted positively to a fresh batch of company earnings reports.

The S&P 500 added 2.8%. The tech-focused Nasdaq Composite gained 3.1%, and the Dow Jones Industrial Average rose 2.4%. All three indexes logged their biggest one-day point and percentage gains since June 24. They have risen more than 6% from their lows in mid-June but remain down sharply for the year.

Investors are parsing earnings reports to determine how decades-high inflation is affecting corporate profits and consumer spending. Economists have been raising the estimated chances of a US recession within the next 12 months, worried that the higher interest rates put in place by the Federal Reserve to curb inflation will weigh on growth.

Some investors, though, are on the lookout for signs from executives that the economic picture might not be as dark as feared.

"When you look at what's happening in the real economy through the lens of our customers, I'd say it's less than 50/50 that we end up with a recession at this point," said Bruce Van Saun, CEO of Citizens Financial Group, which reported earnings that beat expectations Tuesday.

Investors see bank earnings as a good way to determine the path of the broader economy, since their businesses closely track the health of consumers and businesses. Bank of America Chief Executive Brian Moynihan also said on the bank's earnings call earlier this week that its customers' resilience and health remain strong.

"When we hear leaders say that inflation is under check or the general business climate is getting more hospitable, that's what markets react to positively," said Christopher McMahon, president and chief executive of Aquinas Wealth Advisors.

Netflix, which reported after market close, said it lost subscribers in two consecutive quarters for the first time in its history. But the streaming giant lost fewer customers than it had anticipated -- 970,000 compared with an expected two million. Shares rose in after-hours trading.

Investors are paying close attention to comments companies make about plans to cut back on hiring or other investments. Some technology companies, including Apple, Microsoft and Alphabet's Google, have already slowed hiring or cut jobs.

"If the corporate sector starts to cut back on investment spending, that to me is the nail in the coffin," said Luca Paolini, chief strategist at Pictet Asset Management.

Expectations for global growth and profits reached an all-time low in July, according to Tuesday's global fund manager survey from Bank of America. Meanwhile, investors' allocation to stocks is at the lowest level since October 2008, the survey found.

"Nobody is incentivized to be optimistic right now," said Mark Hackett, chief of investment research at Nationwide Investment Management Group. "The market is already positioned for extreme pessimism."

The WSJ Dollar Index, which measures the dollar against a basket of 16 currencies, fell 0.5%. The declining dollar likely drove equities higher, said Anthony Saglimbene, global market strategist at Ameriprise Financial Inc.

"It'll be a headwind if [the dollar] continues to move higher," Mr. Saglimbene said.

The dollar has surged against other currencies this year as investors shelter from falling stocks and bet on US economic resilience. The euro, which hit parity with the dollar last week, rose 0.8% to $1.0227.

In company news, shares of International Business Machines fell $7.25, or 5.25%, to $130.88 after the technology company said shutting down its Russia operations and a strong dollar weighed on its quarterly results. Shares of Lockheed Martin gained $3.10, or 0.8%, to $390.38 after the aerospace and defense contractor reported results that missed analysts' profit and sales estimates.

Johnson & Johnson shares lost $2.54, or 1.5%, reversing earlier gains to close down at $171.69. The pharmaceutical and consumer health products company reported a profit and sales that beat expectations but reduced its earnings outlook for the year on Tuesday. Shares of Halliburton rose 62 cents, or 2.1%, to $29.46 after the oil services company beat profit and revenue expectations.

In bond markets, the yield on the benchmark 10-year Treasury note ticked up to 3.017% from 2.959% Monday. Yields and prices move inversely. And in energy markets, Brent crude, the international benchmark for oil prices, rose 1% to $107.35 a barrel.