Australia

Australian shares are set to open the week flat, even as global markets ended last week lower. US investors are concerned about the state of the US economy, as major companies warn of tough times ahead.

ASX futures were trading flat, down 2 points as of 7:00am on Monday at 6737.
US stocks closed lower Friday as investors came to grips with corporate warnings that paint an increasingly dire outlook for the health of the US economy.

In the past week, big corporations including Goldman Sachs Group Inc. prepared to cut jobs, exacerbating fears of an impending recession. FedEx cautioned late Thursday that it is closing offices to offset declining demand, and General Electric said supply-chain problems were weighing on profits.

The news pushed down stocks, with the Dow Jones Industrial Average falling 139.40 points, or 0.5%, to 30822.42. The S&P 500 dropped 28.02 points, or 0.7%, to 3873.33. For the week, the Dow lost 4.1%, while the S&P retreated 4.8%

The Nasdaq Composite declined 103.95 points, or 0.9%, to 11448.40. It fell and 5.5% for the week, its worst since June. All three indexes are down four of the past five weeks.
In commodity markets, Brent crude oil rose 0.6% to $US91.35 a barrel, gold edged up 0.6% to US$1,675.06.

In local bond markets, the yield on Australian 2 Year government bonds rose to 3.16% while the 10 Year rose to 3.72%. Overseas, the yield on 2 Year US Treasury notes climbed to 3.87% and the yield on the 10 Year US Treasury notes edged up to 3.45%.

The Australian dollar hit 67.17 US cents, flat from the previous close. The Wall Street Journal Dollar Index, which tracks the US dollar against 16 other currencies edged down to 101.50.

 

Asia

The Shanghai Composite Index fell 2.3% to 3126.40, the Shenzhen Composite Index shed 2.3% to 2005.60 and the tech-heavy ChiNext Price Index lost 2.3% to 2367.40. Brokerage companies led losses. The sector dived after authorities called for lower financial service fees in a new government document, a move that could hurt brokerages' income. East Money Information lost 11% while BOC International was 6.0% lower. Coal producers and construction companies further weighed on the market, with Zhengzhou Coal Industry & Electric Power diving 7.1% and Zhejiang Construction Investment falling 5.7%.

Hong Kong stocks ended the session lower, extending the fluctuating trading pattern marked this week. The benchmark Hang Seng Index fell 0.9% to settle at 18761.69. Chinese property developers led the downturn, as the sector retreated following sharp gains on Thursday, driven by a host of government support signals for the industry. Country Garden, one of the top gainers in the previous session, dived 7.6% and Longfor fell 2.9%. On the bright side, Macau casino operators tracked up as investors awaited the latest license bidding results. Sands China rose 3.8% and Galaxy Entertainment gained 2.0%.

Japanese stocks ended lower, dragged by falls in electronics stocks, on persistent concerns about aggressive Fed tightening. Tokyo Electron Ltd. drops 4.3% and Keyence loses 3.7%. Meanwhile, bank stocks ended higher thanks to gains in US Treasury yields. Resona Holdings climbed 3.6% and Sumitomo Mitsui Trust Holdings rose 1.8%. The Nikkei Stock Average fell 1.1% to 27567.65.

Europe

European stocks fell last week. The pan-European Stoxx Europe 600 was down 12.13 points or 2.89% to 408.24, the German DAX was down 346.95 points or 2.65% to 12741.26, while the French CAC 40 Index closed the week down 135.03 points or 2.17% at 6077.30.

In London, the FTSE 100 closed down 0.6% as U.K. retail sale numbers fell 1.6% in August, sending the pound to its lowest levels against the U.S. dollar since 1985, CMC Markets UK analyst Michael Hewson said in a note.

"The U.K. economy is sluggish--retail sales plunged in August--while inflation remains high and further tightening by the BOE--we expect a 50 basis points interest rate hike to 2.25% on Thursday--is unlikely to be enough to compensate for it," Unicredit forex strategist Roberto Mialich said in a note.

InterContinental Hotels were the day's biggest fallers, closing down 4.7%, followed by Dechra Pharmaceuticals and DS Smith, down 4.5% and 3.3%, respectively. Ocado Group was the day's biggest riser, closing up 3.2%, followed by M&G and Hikma Pharmaceuticals, up 2% and 1.8%, respectively.

North America

US stocks closed lower Friday as investors came to grips with corporate warnings that paint an increasingly dire outlook for the health of the US economy.

In the past week, big corporations including Goldman Sachs Group Inc. prepared to cut jobs, exacerbating fears of an impending recession. FedEx cautioned late Thursday that it is closing offices to offset declining demand, and General Electric said supply-chain problems were weighing on profits.

The news pushed down stocks, with the Dow Jones Industrial Average falling 139.40 points, or 0.5%, to 30822.42. The S&P 500 dropped 28.02 points, or 0.7%, to 3873.33. For the week, the Dow lost 4.1%, while the S&P retreated 4.8%

The Nasdaq Composite declined 103.95 points, or 0.9%, to 11448.40. It fell and 5.5% for the week, its worst since June. All three indexes are down four of the past five weeks.

The big moves are surprising given how US stocks appeared on the upswing earlier this summer, climbing from their mid-June lows on the back of earnings that weren't as bad as feared and some strong hiring data. However, investors who had hoped that the midsummer bounce back was the beginning of a new bull market rally got a rude awakening when data on Tuesday confirmed that inflation remains stubbornly high.

Investors now anticipate that the Fed will have to keep raising rates aggressively, which could eventually tip the economy into recession. Futures bets show that traders see a 76% probability that the Fed will raise interest rates by another 0.75 percentage point at its meeting next week, according to CME Group. Investors are also pricing in another rate rise of the same amount in November.

Before Tuesday's inflation data, some money managers had hoped central banks would be in a position to start toning down their rate increases.

"It's clear that they're not going to pivot. That ship has sailed," said Hani Redha, a portfolio manager at PineBridge Investments.

Traders are also nervous the Fed may continue tightening even if the economy slows.
FedEx, a bellwether for the larger economy, said Thursday that its quarterly revenue fell below its expectations. It also said it was closing offices and parking aircraft to offset declining volumes of packages moving around the world. Shares dropped $43.85, or 21%, to $161.02 Friday. That marked its largest percent decrease on record, according to Dow Jones Market Data.

The revenue shortfall was "a clear negative" and added to concerns about how companies may fare in the coming months, Mr. Redha said.

Earlier this week, Corebridge Financial Inc., the life insurance and asset-management unit of American International Group, priced its initial public offering, the first attempt at a large, traditional IPO in the U.S. in months. The offering priced at the low end of expectations and fell in its stock-market debut, disappointing advisers who had hoped the deal might inject life into a floundering IPO market.