Australia

Australian shares are expected to fall this morning following losses across global markets on Tuesday. Most Asian stocks declined after China reported poor July retail sales data. Although the US reported much stronger data, investors reconsidered their stock holdings as yields on US Treasury notes appeared unusually attractive.

ASX futures had fallen 73 points or 1.0% as of 6:00am on Wednesday, suggesting losses at the open.

A wild swing in government bond yields spooked investors Tuesday, weighing on major US stock indices, which have struggled to gain ground in recent weeks.

The S&P 500 dropped 1.2%, while the Dow Jones Industrial Average declined 361 points, or 1.0%. The tech-heavy Nasdaq Composite shed 1.1%. Meanwhile, Canadian stocks tumbled, with the S&P/TSX Composite closing down 1.9%.

The moves continue a stretch of turbulence for stocks, which have dropped in August. Tuesday's declines were broad-based, with all of the S&P 500's 11 sectors falling. The index is still up more than 15% in 2023.

In commodity markets, Brent crude oil dropped 1.5% to US$84.91 a barrel while gold dipped 0.2% to US$1,903.44.

Australian government bonds were higher, with the 2 Year yield rising to 3.99% and the 10 Year yield increasing to 4.26%. US Treasury notes were also higher, with the 2 Year yield climbing to 4.95% and the 10 Year yield advancing to 4.21%.

The Australian dollar declined to 64.53 US cents from its previous close of 64.85. The Wall Street Journal Dollar Index, which tracks the US dollar against 16 other currencies, rose to 98.05.

Asia

Chinese shares finished lower as weak July economic data weighed on the market. Indicators including industrial production and retail sales came "broadly below market expectations, reflecting still-subdued growth momentum despite the ongoing policy easing," explained Goldman Sachs economists in a note. Chipmakers and consumer brands led the losses. Will Semiconductor shed 7.8% and China Tourism Group Duty Free dropped 1.8%. Among the gainers were financial stocks. Citic Ltd. added 1.5% and Bank of China rose 2.7%. The benchmark Shanghai Composite Index dropped 0.1% to 3176.18. Both the Shenzhen Composite Index and the tech-heavy ChiNext Price Index declined 0.7%.

Hong Kong shares ended lower, weighed down by weak Chinese economic data, which suggested a slowing recovery. The Hang Seng Index dropped 1.0% to 18581.11. Investors are now focusing on Beijing's rescue policy, which is expected to come in 3Q. "To meet the growth target, we are in a race between policies and the economy. The policy trough has been confirmed by the Politburo, and it is now time for delivery," said Citi economists in a note. Consumer and financial stocks led the losses. Restaurant group Haidilao dropped 4.5% and HSBC Holdings shed 1.8%. Retailer JD.com lost 1.4% ahead of 2Q earnings due Tuesday night.

Japanese stocks ended higher, led by gains in electronics shares, after stronger-than-expected domestic growth data for the April-June period. NEC Corp. gained 3.1% and TDK climbed 2.5%. The Nikkei Stock Average rose 0.6% to 32238.89. Investors were focusing on economic data, including US retail sales due later in the day, for their policy implications.

Indian stocks stood still on Tuesday, as the country celebrated its Independence Day.

Europe

European stocks dropped after mixed trading in Asia and as Wall Street opened lower. The pan-European Stoxx Europe 600 fell 1.0% and the German DAX declined 0.9% while the French CAC 40 retreated 1.1%. Financial, mining and tech stocks led the losses.

"European markets have continued to look weak, with the FTSE 100 and the DAX falling to one-month lows, after the latest economic numbers from China showed worse-than-expected retail sales and industrial production data for July," CMC Markets analyst Michael Hewson wrote. "US markets have taken their cues from today's weakness in European markets, opening lower even as July retail sales came in at 0.7%, beating expectations of a 0.4% rise."

The United Kingdom’s FTSE 100 performed the worst among its European peers, ending with a 1.6% loss at a one-month low. The British benchmark was dragged by basic resources, energy and financial stocks on the back of worse-than-expected Chinese economic data, while UK wage growth suggested that interest rates may well have to stay higher for longer, Hewson explained in a note.

Phoenix, Europe's largest consolidator of life insurance and pensions, was the worst performer on the FTSE 100, down 3.6%, followed by Asia-focused bank HSBC and Glencore, down 3.41% and 3.40%, respectively.

North America

A wild swing in government bond yields spooked investors Tuesday, weighing on major US stock indices, which have struggled to gain ground in recent weeks.

The S&P 500 dropped 1.2%, while the Dow Jones Industrial Average declined 361 points, or 1.0%. The tech-heavy Nasdaq Composite shed 1.1%. Meanwhile, Canadian stocks tumbled, with the S&P/TSX Composite closing down 1.9%.

The moves continue a stretch of turbulence for stocks, which have dropped in August. Tuesday's declines were broad-based, with all of the S&P 500's 11 sectors falling. The index is still up more than 15% in 2023.

"People are a little bit nervous to really buy this pullback," said R.J. Grant, director of equity trading at KBW.

Yields increased after fresh data showed strong consumer spending continues to power US economic growth, with retail sales jumping 0.7% in July, beating economists' forecasts.

The yield on the 10 Year US Treasury note rose as high as 4.264% in early trading Tuesday, marking one of its highest levels since 2008. It ended a volatile session at 4.220%, the highest since October.

Some investors said attractive yields in Treasurys and other ultrasafe assets have complicated the math for investing in stocks, leading investors to park their cash elsewhere.

The equity-risk premium -- or the gap between the S&P 500's earnings yield and that of 10 Year Treasurys -- recently touched the lowest level since at least 2003. A lower premium makes stocks less attractive relative to bonds.

"That introduces fragility in the market," said Sébastien Page, head of global multi-asset at T. Rowe Price.

The retail sales data led some traders to re-examine their forecasts for interest-rate cuts next year. Futures traders still see another quarter-point hike as unlikely this year, but they now predict fewer cuts in 2024 than they did a month ago, according to FactSet data.

Tuesday's data is the latest morsel of evidence pointing to a strong US economy, even as some others around the globe are showing strains.

New data showed that China's economy is slowing, with retail sales and home sales increasing at a milder pace. The country's central bank lowered two key lending rates on Tuesday, surprising the market and signaling that its economy needs another boost. The yuan weakened to some of its lowest levels this year.

Russia's central bank jacked up its key interest rate at an emergency meeting to stem a sharp selloff in the ruble and rising inflation. The ruble has been among the world's worst-performing currencies and Russia's economy has been weakening during Moscow's war in Ukraine.

Meanwhile, some investors say US stock valuations are growing increasingly unattractive after the big rally this year. Many companies have reported earnings that have topped analysts' expectations, though the stock rally has stalled anyway.

"You're pushing some pretty sporty valuations on a pretty significant section of the marketplace," said Erik Ristuben, chief investment strategist at Russell Investments. "There's a point at which better-than-expected doesn't mean good value for the future."

In corporate news, Discover Financial's stock dropped 9.4% after the payments company said its chief executive would step down immediately.

Shares of homebuilders bucked the larger trend and were some of the best performers in the S&P 500. Shares of D.R. Horton, NVR and Lennar rose after Warren Buffett's Berkshire Hathaway revealed new positions in the home builder stocks. D.R. Horton shares added 2.9%, while NVR gained 0.5%. Lennar added 1.8%.

The holdings were together worth more than $800 million at the end of June, a small portion of Berkshire's massive equity portfolio.