Australia

Australian shares are set to edge lower following a dip on Wall Street. Investors continue to look for clues on the direction markets might take from the US Federal Reserve interest rate decision.

ASX futures were down 56 points or 0.7% at 7291 as of 7:00am on Tuesday, pointing to a slip at the open.

US stocks fell in the last hours of trade on Monday after new readings on service-sector activity and factory output suggested the economy remains resilient even as the Federal Reserve raises interest rates to try to slow growth.

The S&P 500 dropped 2%, pulling back after a November rally that was driven by hopes that the Fed would slow down its pace of rate increases. The Dow Jones Industrial Average declined 544 points, or 1.6%, and the Nasdaq Composite lost 2.2%.

Investors' hopes for a pivot from the Fed are dependent on incoming data. On Friday, for instance, a relatively strong jobs report tamped down some of the enthusiasm in the stock market amid worries that the central bank will have to keep raising rates to slow the economy.

The November rally, during which both stocks and bond prices rose, in itself was enough to make a give-back kind of day like today inevitable, said David Kelly, chief global strategist at JPMorgan Funds. "We were due for some sort of relapse," he said.

In commodity markets, Brent crude oil slipped 3.03% to $US82.98 a barrel, gold edged down 1.6% to US$1,768.84.

In local bond markets, the yield on Australian 2 Year government bonds dropped to 2.97% while the 10 Year fell to 3.36%. Overseas, the yield on 2 Year US Treasury notes declined to 4.40% and the yield on the 10 Year US Treasury notes was down at 3.60%.

The Australian dollar hit 66.92 US cents. The Wall Street Journal Dollar Index, which tracks the US dollar against 16 other currencies edged higher, to 98.13.

Asia

Chinese shares ended broadly higher, with the Shanghai benchmark index reclaiming the 3200 level for the first time in over two months as sentiment was buoyed by the easing of Covid restrictions during the weekend. Shares of consumer-related companies from airlines to food-chain operators helped push the market higher. Air China jumped 2.3%, China Tourism Group Duty Free Corp. gained 2.8% and index heavyweight Kweichow Moutai added 1.9%. The Shanghai Composite Index closed 1.8% higher at 3211.81 and the Shenzhen Composite Index rose 0.9%, though the ChiNext Price Index dropped 0.3%.

Hong Kong stocks ended sharply higher, as investors grew increasingly optimistic over the outlook for China's reopening after several cities further dialled back pandemic curbs over the weekend. The benchmark Hang Seng Index jumped 4.5% to settle at 19518.29, while the Hang Seng Tech Index surged 9.3% to 4238.20. Property developers, consumer goods companies and casino operators led gains. Longfor rose 17%, while both Sands China and Xiaomi advanced 14%.

The Nikkei Stock Average ended 0.2% higher at 27820.40 as gains in energy and retail stocks help offset losses in auto and financial stocks. Fast Retailing gained 3.1% and Inpex added 0.5%, while Resona Holdings lost 2.7% and Nissan Motor dropped 2.7%. The broader market index Topix fell 0.3%.

Europe

European stocks mostly fell as Wall Street dropped amid concerns about the economy and China.

The pan-European Stoxx Europe 600 dropped 0.4%, the French CAC 40 retreated 0.7% and the German DAX backtracked 0.6%, though in London, the FTSE 100 edged up 0.1% as the sterling weakened against the dollar and the euro.

"China's all-too tentative moves towards re-opening its economy have distinctly underwhelmed stock markets, which instead have gone back to worrying about the Fed," IG analyst Chris Beauchamp wrote. "Friday's job report continues to loom over markets, causing further losses as some dovish bets are pared back."

North America

US stocks fell in the last hours of trade on Monday after new readings on service-sector activity and factory output suggested the economy remains resilient even as the Federal Reserve raises interest rates to try to slow growth.

The S&P 500 dropped 2%, pulling back after a November rally that was driven by hopes that the Fed would slow down its pace of rate increases. The Dow Jones Industrial Average declined 544 points, or 1.6%, and the Nasdaq Composite lost 2.2%.

Investors' hopes for a pivot from the Fed are dependent on incoming data. On Friday, for instance, a relatively strong jobs report tamped down some of the enthusiasm in the stock market amid worries that the central bank will have to keep raising rates to slow the economy.

Monday brought two new pieces of data to reinforce that narrative. The Institute for Supply Management's November US nonmanufacturing index, a reading on the services sector, came in at 56.5, up from 54.4 in October and above expectations of 53.7.

Separately, factory orders in October were up 1%, according to the Commerce Department, also above market expectations, which were for a rise of 0.7%.

The November rally, during which both stocks and bond prices rose, in itself was enough to make a give-back kind of day like today inevitable, said David Kelly, chief global strategist at JPMorgan Funds. "We were due for some sort of relapse," he said.

Investors had been focused more on good news and betting on a more dovish Federal Reserve, said Karl Chalupa, the chief executive and co-founder of Gamma Investing Consulting. But he sees the economy slowing and expects equities will turn lower after the holidays.

"The market was trading on rosy news," he said. "From our perspective it's not going to be realized."

In corporate news, shares of Tesla fell 6.8% after Bloomberg and Reuters reported the electric-vehicle maker plans to cut production at its Shanghai plant in December.