Australia

Australian shares are expected to decline this morning after most global markets suffered on Friday. China’s economy, particularly the property sector, continued to worry investors following last week’s less-than-ideal economic data. Meanwhile, attractive yields on US Treasury notes inspired massive inflows into bonds and money-market funds, sending stock indices lower.

ASX futures were 23 points or 0.3% lower as of 10:00am on Sunday, suggesting a dip at the open.

Major US stock indices shed more than 2% last week, deepening their August slump, while Treasury yields touched their highest levels in years.

US government bond yields on Friday fell back from Thursday's multiyear highs, but remained lofty enough to make investors think twice about betting on stocks to maintain this year's surprising rally.

The Nasdaq, packed with rate-sensitive technology stocks, fell 0.3% on Friday. The Dow Jones Industrial Average rose about 26 points, less than 0.1%, while the S&P 500 was unchanged. Every segment of the S&P 500 ended the week lower. Canada’s benchmark, the S&P/TSX Composite, was also flat.

In commodity markets, Brent crude oil gained 0.8% to US$84.80 a barrel while gold was unchanged at US$1,889.31.

Australian government bonds were lower, with the 2 Year yield declining to 3.91% and the 10 Year yield dropping to 4.23%. US Treasury notes continued to offer investors higher yields, with the 2 Year rising to 4.94% and the 10 Year reaching 4.25%.

The Australian dollar inched higher, to 64.03 US cents. The Wall Street Journal Dollar Index, which tracks the US dollar against 16 other currencies, edged down to 98.20.

Asia

Chinese shares ended lower, with nearly all sectors in the red and the Shanghai Composite Index losing 1.8% for the week. Weak economic data for July and fresh property-market concerns sparked by China Evergrande Group filing for chapter 15 bankruptcy in the US weighed on investors' mood. Consumer brands and software makers led the session's losses. China Tourism Group Duty Free shed 4.95% and Beijing Kingsoft Office dropped 3.4%. The banking sector was the sole bright spot, with China Construction Bank adding 0.85% and ICBC gaining 0.2%. The benchmark Shanghai Composite Index closed 1.0% lower at 3131.95. The Shenzhen Composite Index fell 1.7% and the tech-heavy ChiNext Price Index lost 1.3%.

Hong Kong shares ended lower amid concerns over China's economic growth after Beijing released a slew of sluggish economic activity data earlier this week. The Hang Seng Index ended 2.1% lower at 17950.85. Fresh concerns over the Chinese property market sparked by China Evergrande's filing for Chapter 15 bankruptcy protection in the US also weighed on investors' mood. The Hang Seng Mainland Properties Index declined 2.1%, with Longfor Group Holdings declining 3.8%. Tech companies also weighed on the market, with the Hang Seng Tech Index falling 3.6%. Xpeng dropped 6.6% and Alibaba Group Holding declined 3.4%.

Japanese stocks ended lower, dragged by falls in retail and pharmaceutical shares as concerns persisted over policy tightening by central banks and its impact on the economy. Zensho Holdings dropped 4.3% and Daiichi Sankyo declined 2.0%. The Nikkei Stock Average fell 0.6% to 31450.76. Investors were focused on the summit meeting between US, Japanese and South Korean leaders at Camp David.

Indian shares closed lower, tracking regional losses, amid a broader risk-off sentiment in Asian markets. The US's resilient economic data is leading markets to reassess the direction of the Fed funds rate, while China's economic outlook continues to weigh on investor sentiment, ANZ analysts said in a research note. Information technology and financial stocks led losses. Infosys declined 1.6% and Tech Mahindra fell 1.8%. Bajaj Finserv lost 1.2% and Kotak Mahindra Bank was down 0.9%. Among gainers, Reliance Industries was up 0.75% and Maruti Suzuki India gained 1.0%. The benchmark Sensex index closed 0.3% lower to end at 64948.66, sliding for the fourth consecutive week.

Europe

European stocks closed lower, with the pan-European Stoxx 600 index ending down 0.6% at 448.44. Concerns mounted regarding the health of China's economy after ailing Chinese property developer Evergrande filed for bankruptcy protection in the US on Thursday. Anxiety about rising bond yields and the impact of higher interest rates also continued to weigh on sentiment.

"Global stock indices ended the week in the red as China's Evergrande Group filed for US bankruptcy protection as part of one of the world's biggest debt restructurings," IG analysts wrote. Meanwhile, Germany's DAX ended down 0.7% and France's CAC 40 fell 0.4%

The United Kingdom’s FTSE 100 closed Friday down 0.7% to 7262 points, marking its sixth day in negative terrain and matching its worst losing streak since October last year. Telecommunications group Airtel Africa was the worst performer on the British index, with shares closing down 4.4%, followed by RS Group and miner Antofagasta, down 3.5% and 3.3%, respectively.

North America

Major US stock indices shed more than 2% last week, deepening their August slump, while Treasury yields touched their highest levels in years.

US government bond yields on Friday fell back from Thursday's multiyear highs, but remained lofty enough to make investors think twice about betting on stocks to maintain this year's surprising rally.

The Nasdaq, packed with rate-sensitive technology stocks, fell 0.3% on Friday. The Dow Jones Industrial Average rose about 26 points, less than 0.1%, while the S&P 500 was unchanged. Every segment of the S&P 500 ended the week lower. Canada’s benchmark, the S&P/TSX Composite, was also flat.

"The market seemed to be a bit ahead of itself in these last couple of months. It was due for a slowdown," said Eric Kelley, interim chief investment officer at UMB Financial, a Kansas City bank. "It's still been an incredible year, even with the week we've had."

Bond yields, on the other hand, may have room yet to rise, he said, reasoning that they tend to peak just before the Federal Reserve reaches the end of rate-hike cycles. "The Fed is sending a very clear signal that we can't assume that they're done," Kelley said.

Kelley said UMB analysts have concluded that 10 Year Treasury yields greater than 4.75% pose a serious threat to stocks.

The 10 Year Treasury yield declined to 4.251%, from 4.307% on Thursday, which was the highest closing level since 2007. The 30 Year Treasury yield was 4.379%, down from Thursday's 12 Year high of 4.411%. Bills from one-month to one-year are paying more than 5%.

"Almost no one under 40 has invested in an environment that wasn't characterized by zero-interest rate policy," said Doug Peta, chief US investment strategist at BCA Research.

More than a decade of piddly yields on government bonds gave rise to the belief that "there is no alternative" worth investing in besides equities. Over the past year, as the Fed has raised interest rates in hopes of taming inflation, investors have begun to rethink the TINA philosophy.

"Now there are plenty of alternatives," Peta said.

Money-market funds continued to balloon this week as investors parked cash in sure bets on government bonds. Money-market funds drew in almost $36 billion over the past week, their biggest inflow since May.

Mountains of money moving out of stocks and into bonds is one way that investors expect higher interest rates to eventually end the rally in stocks that has sent the S&P 500 14% higher so far this year and the Nasdaq up 27%. The other threat comes from higher borrowing costs eroding consumers' spending power and corporate earnings.

The biggest losers in the S&P 500 on Friday were sunk when they reported quarterly earnings and issued financial outlooks that disappointed investors.

Keysight Technologies, which makes electronic test and measurement equipment such as oscilloscopes and digital multimeters, dropped 14%. Deere & Co. fell 5.3%.

Mounting concern over China's economy is one worry for Deere shareholders, while analysts noted that the company's increased financial guidance was mainly because of a favorable tax ruling in Brazil.

Cosmetics giant Estée Lauder, which shed 3.3% Friday, chalked up its quarterly loss to declining sales in China.

Ross Stores was the S&P 500's top gainer. The discount retailer rose 5% after posting better-than-expected earnings and boosting its second-half sales and profit outlooks after Thursday's closing bell. Cheaper ocean freight is helping margins and lower inflation is giving its low- to moderate-income customers more to spend, executives said.