Australia

Australian shares are set to open lower, after the stock-market selloff extended around the world, with U.S. indexes sliding and volatility spiking.

ASX futures were down 0.35% or 27 points as of 8:00am on Tuesday, suggesting a lower open.

U.S. stock indexes opened sharply lower, tracing declines in international markets, before recovering somewhat after a survey of purchasing managers showed the services sector expanded last month at a slightly higher rate than expected.

The tech-heavy Nasdaq led the way, falling 3.4%. Every industry segment in the S&P 500 declined, pushing the broad index 3% lower. All 30 stocks in the Dow Jones Industrial Average ended lower and the blue-chip index shed 2.6% or 1,034 points.

In commodity markets, Brent crude oil was down 0.7% to US$76.30 a barrel, while gold was flat at US$2,411.81.

The Australian dollar was at 64.92 US cents, down from its previous close of 64.94.

Asia

Chinese shares ended lower amid a broad risk-off sentiment across Asia following worries over weak U.S. economic data. China's state council's guidelines to boost local consumption briefly supported mainland Chinese shares but were unable to hold on to the gains. The benchmark Shanghai Composite Index closed 1.5% lower at 2,860.70, the Shenzhen Composite Index dropped 2.1% and the ChiNext Price Index declined 1.9%. Foxconn Industrial Internet led the losses, falling 8.55%, after its 1H earnings. The semiconductor sector was also broadly lower with Cambricon Technologies down 6.7% and Giga Device Semiconductor falling 6.5%. Airline stocks gained with Spring Airlines up 2.7%.

Hong Kong shares ended lower, weighed down by energy stocks and following other markets in the region lower as risk-off sentiment hit equities. The Hang Seng Index was 1.5% lower at 16,698.36, and the Hang Seng Tech Index shed 1.4%. Investors are worried about a "hard landing" in the U.S. economy, Capital Economics analysts say in a research note, after weaker-than-expected data resurfaced recession fears. Energy stocks led the declines in Hong Kong, with Cnooc dropping 6.4% and PetroChina 5.4% lower. Property stocks were the top gainers. New World Development was 5.3% higher and Wharf Real Estate Investment added 6.2%.

The Nikkei Stock Average fell 12% to 31,458.42, its biggest one-day percentage drop since October 1987. Financial and exporter stocks led the day's declines. Sumitomo Mitsui Financial Group dropped 16% and carmaker Subaru Corp. shed 18%. The index gave up all gains made in 2024 and fell 25% from its recent high in July, entering a bear-market territory. The 10-year Japanese government bond yield fell 20.5 basis points to 0.750% as expectations waned for Bank of Japan's further rate increases. Investors were focusing on earnings and conflicts in the Middle East.

India's Sensex fell 2.7% to close at 78,759.40, following other indexes lower amid a broad equity market selloff. Weak U.S. manufacturing and jobs data have caused fears of a worse-than-expected U.S. economic slowdown, Nomura research analysts write in a note. The soft U.S. data has raised the chances of larger Fed rate cuts due to growth concerns, "causing investors to question whether the U.S. can engineer a soft landing," they write. Tata Motors fell 7.3%, Adani Ports & Special Economic Zone lost 5.9% and Tata Steel was 5.3% lower. Among the few gainers, Hindustan Unilever rose 0.8% and Nestle India gained 0.6%.

Europe

Stocks in the U.K. fell Monday, as the FTSE 100 Index fell 2.0% to 8008.23.

Among large companies, John Wood Group PLC posted the largest decline, dropping 35%, followed by shares of Clarkson PLC, which dropped 15%. Shares of Zegona Communications PLC dropped 12%.

St. James's Place PLC was the biggest gainer during the session, rising 0.7%, and Fevertree Drinks PLC rose 0.6%. Haleon PLC rounded out the top three movers on Monday, as shares rose 0.4%.

In other parts of Europe markets closed lower, with the STOXX Europe 600 Index down 2.2% to 487.05, Germany's DAX dropped 1.8% to 17,339.00 and France's CAC 40 fell 1.4% to 7,148.99.

North America

The unwinding of some of Wall Street's most popular trades intensified Monday, sending Japanese stocks to their worst day since the 1987 market crash and walloping U.S. technology shares.

U.S. stock indexes opened sharply lower, tracing declines in international markets, before recovering somewhat after a survey of purchasing managers showed the services sector expanded last month at a slightly higher rate than expected.

The tech-heavy Nasdaq led the way, falling 3.4%. Every industry segment in the S&P 500 declined, pushing the broad index 3% lower. All 30 stocks in the Dow Jones Industrial Average ended lower and the blue-chip index shed 2.6% or 1,034 points.

The Russell 2000 index of small stocks, resurgent in recent weeks, lost 3.3%. Oil, precious metals and bitcoin fell. Wall Street's fear gauge, the CBOE Volatility Index, or VIX, jumped more than 50% during stock-trading hours to its highest level since 2020.

The rout began in Asia, where Japan's Nikkei 225 tumbled 12% amid a surging yen. It was the worst single-day percentage drop for the Nikkei since Oct. 20, 1987. That was the Tuesday after Black Monday in the U.S., when the Dow industrials fell nearly 23%.

The selloff in Tokyo extended last week's rout that followed the Bank of Japan's decision to raise interest rates. That move pushed the yen higher relative to other currencies. Disappointing economic data in the U.S. stoked the selloff, unwinding a popular Wall Street bet known as the carry trade.

For years, investors around the world bought riskier assets, such as U.S. stocks, and funded the trades with the yen, thanks to ultralow interest rates in Japan. Until recently, many hedge funds and money managers expected rates to remain low and the yen weak.

Instead, the strengthening yen has squeezed the carry trade. Investors who borrowed yen to fund their bets have been forced to buy more of the currency by bankers insisting on additional collateral. That is pushing the yen even higher, prompting more margin calls.

It is an example of the popular trades that are coming unraveled as investors mull weakening U.S. economic data and tech shares' sky-high valuations while awaiting the Federal Reserve's next move on interest rates.

Investors have been expecting the central bank to cut rates at its September meeting. Now the debate centers on whether the Fed might take the rare steps of making a larger-than-usual half-percentage-point cut or even lowering borrowing costs between meetings.

In one sign that growth is continuing, Treasury yields recovered from sharp early declines following Monday's strong reading of the services sector. The Institute for Supply Management's survey of service businesses rose to 51.4 in July, from 48.8 in June, which was the lowest reading since the depths of the Covid-19 lockdown in 2020. Readings over 50 indicate expansion.

A similar ISM survey of manufacturing companies last week slipped deeper into contraction, prompting bonds to rally and a selloff in stocks. Monday's services reading suggests that the swath of the U.S. economy that employs the most people might not be in as bad shape as manufacturing.

The yield on the benchmark 10-year Treasury note ended at 3.782%, down from its Friday settlement of 3.795% and well off the 2024 high of 4.706% in late April.

The two-year yield, which often moves with expectations for short-term rates set by the Fed, inched up to 3.88%.

While investors wait, they are dumping the technology stocks that propelled the market to new highs this year. Each of the so-called Magnificent Seven technology stocks declined at least 2.5%. Nvidia, the must-own stock of the artificial-intelligence frenzy, lost 6.4%.

Investors have questioned whether those companies' share prices had outrun realistic forecasts for future profits.

"The technology sector has come under particular duress in recent weeks amidst fear that companies are overspending on artificial intelligence infrastructure just as economic growth is beginning to slow," said John Belton, portfolio manager at Gabelli Funds.

Warren Buffett's Berkshire Hathaway on Saturday disclosed that it had slashed its position in Apple during the second quarter, selling nearly half of its huge stake in the iPhone maker.

The regulatory disclosure sent a strong signal to the droves of investors who look to the Nebraska-based billionaire, known as the Oracle of Omaha, for signs of shifting market sentiment.

"It's something that people pay attention to due to his historic track record of going against the greed-and-fear rotations of the market," said Brian Burrell, portfolio manager at Thornburg Investment Management in Santa Fe, N.M. "When a contrarian starts to move and everyone is positioned the other way, that's a reason to re-examine their positioning."

Apple shares, which had withstood the tech selloff better than rivals over the past month, fell 4.8% Monday.

Keith Buchanan, senior portfolio manager at Globalt Investments, said the Atlanta firm is holding an unusually large amount of cash after selling down stakes in the large, fast-growing companies in order to lock in gains and be ready to buy when the dust settles.

"We started tipping out the back door of that trade," he said. "The risks were becoming too apparent."