Australia

Australian shares are set to edge up, shrugging off a bout of selling on Wall Street as the Nasdaq dipped into correction territory in a volatile session for US indices.

ASX futures were up 10 point or 0.1% at 7226 near 8.30 am AEST, suggesting a positive start to trading.

US stocks gave up early gains and turned lower, extending a recent stretch of losses that have pulled major indexes lower to start the year.

The technology-heavy Nasdaq Composite Index shed 1.15% and finished the day 10.5% below its all-time closing high from last November. A decline of greater than 10% is considered a correction for a stock index.

The S&P 500 fell 1%. The benchmark gauge lost 1.8% Tuesday, its second decline in three trading days. The Dow Jones Industrial Average also fell 1%.

Locally, the S&P/ASX 200 closed 1.0% lower at 7332.5, losing ground through the afternoon amid weakness in financial and technology stocks.

The benchmark had followed US indexes by dropping steeply at the open but rallied to sit 0.3% lower after lunch. Yet it fell away sharply for its lowest close since 20 Dec.

The heavyweight financial sector gave up 1.35% as banks ANZ, Westpac, NAB, Commonwealth and Macquarie fell between 0.7% and 4.1% following weak pre-Christmas payroll data.

Megaport shed 16% after its 2Q trading update and Afterpay slipped 2.2%, following a weak lead by US tech stocks including its acquirer, Block.

BHP announced production fell 4% year-on-year 1H FY2022 because of lower copper and metallurgical coal volumes. Shares took the news in stride, dipping 0.3%. The report came a day after Rio Tinto missed analysts' 4Q expectations and offered a weak outlook.

Overseas stock markets were mixed following Tuesday's selloff on Wall Street. The Stoxx Europe 600 rose 0.2%, as gains for retail and resource stocks offset losses for food, drink and insurance companies. Asian stocks came under pressure, with Japan's Nikkei 225 skidding 2.8%. China's Shanghai Composite Index slipped 0.3%.

Turning to commodities, gold futures jumped 1.7% to $US1842.70 an ounce; Brent crude added 0.6% to $US88.05 a barrel amid concerns over supply disruptions in Russia and the Middle East.; Iron ore rose for a second day, advancing 2.3% to US$130.20 a tonne.

In bond markets, the yield on the Australian 10-year bond rose to 1.99%, while the benchmark US 10-year Treasury yield edged lower to 1.85%.

The Australian dollar was buying 72.19 US cents near 8.00am AEST, up from the previous close of 71.82. The WSJ Dollar Index, which measures the US dollar against 16 other currencies, tracked down to 89.41.

Asia

Chinese stocks closed lower as lithium producers and related battery companies declined, amid signs of insufficient inventory stockpiles in the downstream sector, Daiwa Capital Markets said. This could cause lithium prices to rise in the short term and remain elevated amid continued supply issues, it said. Ganfeng Lithium and Tianqi Lithium dropped 4.9% and 5.9%, respectively, while CATL fell 2.9%. Other decliners included car makers BYD Co., down 4.9%, and Great Wall Motor which closed 3.2% lower. The Shanghai Composite Index ended 0.3% lower, the Shenzhen Composite Index fell 0.9% and the ChiNext Price Index retreated 2.2%.

Hong Kong stocks ended slightly higher, showing signs of some improvement after falling two straight sessions earlier this week. The benchmark Hang Seng Index edged up 0.1%. Chinese property developers led gains, as the sector recovered from steep losses in the past couple sessions when weak housing price data for December pressured investor sentiment. Country Garden Services jumped 8.4% and its parent Country Garden rose 8.3%. China Overseas Land and Investment added 4.9%, while Longfor was up 4.4%. The financial sector lent further support, as banks and insurers continued to track up after Beijing signalled further monetary easing. China Merchants Bank rose 2.1% and AIA Group added 1.9%.

Japanese stocks finished broadly lower, dragged by selling in electronics and shipping stocks, as concerns persist that the Fed may raise rates more quickly than previously thought. Sony Group fell 13% following news that Microsoft agreed to buy Activision Blizzard. The Nikkei Stock Average dropped 2.8%. Investors are focusing on US economic data to assess the pace of the Fed's potential rate increases.

Europe

European stocks rise as investors shrug off overnight losses in China and Japan and lacklustre trading on Wall Street. The pan-continental Stoxx Europe added 0.2%.

"After a big sell-off in Asia markets, European markets initially started the day on the back foot," CMC Markets analyst Michael Hewson says. "However, as the day progressed, all the early losses have dissipated, helped by a slew of decent trading updates and a rebound in the basic-resources sector, lifted by rising metal prices."

In London, the FTSE 100 rose 0.3%.

Bond markets on the continent hit records Wednesday with Europe's most closely watched government bond yield turning positive for the first time since 2019. The yield on 10-year German bund rose as high as 0.021% Wednesday after trading in negative territory for over 30 months. Ten-year UK yields, meanwhile, reached their highest level since March 2019 after data showed inflation hitting a 30-year high.

North America

US stocks gave up early gains and turned lower, extending a recent stretch of losses that have pulled major indexes lower to start the year.

The technology-heavy Nasdaq Composite Index shed 1.15% and finished the day 10.5% below its all-time closing high from last November. A decline of greater than 10% is considered a correction for a stock index.

The S&P 500 fell 1%. The benchmark gauge lost 1.8% Tuesday, its second decline in three trading days. The Dow Jones Industrial Average also fell 1%.

Wednesday's trading activity continued a tumultuous stretch for major indexes, with stocks paring their earlier gains. In the first weeks of January, many investors have started dumping shares of technology companies and piling into other corners of the market in anticipation of rising interest rates. Some investors are positioning for the Covid-19 pandemic to turn into an endemic.

Investors have stepped up bets that the Federal Reserve and other major central banks will tighten monetary policy in the coming months, withdrawing a pillar of support for markets. Mounting expectations of interest-rate rises follow evidence that the drivers of inflation have broadened beyond the supply-chain shock that fuelled price gains for much of 2021.

Recent volatility is "really all about inflation and how aggressive central banks are going to be to counteract it," said Brian O'Reilly, head of market strategy at Mediolanum Asset Management, adding that inflation could also curtail economic growth by knocking consumption. "Certainly, the market is nervous at the moment," he said.

As a result, many investors have backed away from what was one of the hottest areas of the market: tech. The Nasdaq Composite is down 8% this year, a much sharper decline than the S&P and Dow.

Government-bond prices edged up Wednesday, pushing down yields. Yields on benchmark 10-year Treasury notes slipped to 1.836% from 1.866% Tuesday, which was their highest level since January 2020. Yields on interest rate-sensitive two-year notes were down to 1.031% from 1.038% Tuesday

There has also been a big rotation among individual stocks and sectors. The S&P 500's value index is outperforming its growth index by around 6.8 percentage points this month, on pace for the biggest monthly outperformance since December 2000, according to Dow Jones Market Data.

And there are signs that individual investors—a key force behind 2021's stock-market rally—are cooling on tech, according to analysts at Vanda Research. Retail investors have been buying shares of financials and energy companies while their purchases of highflying stocks like Advanced Micro Devices and Nvidia have been dwindling, Vanda said.

"There is currently a knee-jerk reaction occurring in the market," in response to rising bond yields, said Dev Kantesaria, founder of Valley Forge Capital. But, he added "equities today as a whole are very attractive relative to bond yields."

Some of the US's biggest lenders reported rising earnings before the market opened. Bank of America shares rose 1.8% after the lender reported a jump in fourth-quarter profits, while Morgan Stanley's shares gained 2.8% on profits that topped forecasts. US Bancorp fell around 7% after the bank holding company posted a rise in compensation costs. This earnings season, Goldman Sachs, JPMorgan Chase and Citigroup have also reported shelling out more in compensation.

Procter & Gamble said consumers were undeterred by higher prices, leading to higher revenue and lifting shares of the consumer-goods company around 4%.