Australia

Australian shares are expected to open lower this morning following a disappointing session on Wall Street. Although the energy sector rose on higher prices for US oil, tech stocks dropped as investors worried about the outlook for interest rates. July’s consumer-price index (CPI) report, scheduled for Thursday, is expected to shine some light on the Federal Reserve’s next policy decision.

ASX futures were down 6 points or 0.1% as of 6:00am on Thursday, suggesting a slightly lower open.

Rising oil prices lifted energy stocks Wednesday during an otherwise downbeat session.
The S&P 500's energy sector gained 1.2% as Texas crude contracts, the US oil-price benchmark, pushed to a new 2023 high, settling at $84.40 a barrel. Solid American fuel demand and international supply cuts have supported oil prices over the summer despite lagging consumption in China.

More broadly, US equities edged lower. The S&P 500 lost 0.7%, and the Dow Jones Industrial Average gave up 191.13 points, or 0.5%, to end at 35123.36. The tech-focused Nasdaq Composite shed 1.2%, weighed down by sizable drops for major components such as Nvidia, Tesla and Facebook parent Meta Platforms. Meanwhile, Canadian stocks rose, with the S&P/TSX Composite inching 0.3% higher.

Those moves left intact the major indices' drop so far this month, with trading shaded by renewed concerns that ripples from high interest rates are depressing stocks' worth.

Inflation has slinked lower alongside continued job gains in the labor market. But many investors have worried that the Federal Reserve's resolute anti-inflation posture may dampen equities' momentum.

In commodity markets, Brent crude oil advanced 1.4% to US$87.41 a barrel while gold lost 0.5% to US$1,915.68.

The 2 Year yield on Australian government bonds was unchanged at 3.77%, while the 10 Year yield dipped to 3.99%. US Treasury notes were lower, with the 2 Year yield declining to 4.80% and the 10 Year yield slipping to 4.00%.

The Australian dollar backtracked to 65.33 US cents from its previous close of 65.42. The Wall Street Journal Dollar Index, which tracks the US dollar against 16 other currencies, edged higher to 97.25.

Asia

Chinese shares ended lower as July's CPI data, at minus 0.3% on year, weighed on sentiment. "Deflation in both the CPI and PPI inflation, along with weaker exports and imports, soft July PMIs and contracting auto and property sales, painted a weak recovery picture in the month," Barclays economists said in a note. The media sector and hardware makers led the losses. Mango Excellent Media dropped 2.2% and Foxconn Industrial Internet declined 8.0%. The benchmark Shanghai Composite Index closed 0.5% lower at 3244.49. The Shenzhen Composite Index fell 0.6% and the tech-heavy ChiNext Price Index ended flat.

Hong Kong shares closed higher, recovering from earlier losses after China's consumer prices fell 0.3%, the first decline in two years. Pharmaceutical stocks and transportation stocks led gains. Hansoh Pharmaceutical Group grew 3.8% and Sino Biopharmaceutical was up 3.0%. Orient Overseas (International) rose 2.0% and MTR climbed 1.2%. The Hang Seng Mainland Properties Index rose 0.3% after state media reported that Chinese officials plan a high-level meeting on how to adjust and optimize real estate-related policies in August. Country Garden Holdings and its property services affiliate extended losses for a second session after reports the property developer missed US bond coupon payments. The benchmark Hang Seng Index was up 0.3% at 19246.03, while the Hang Seng Tech Index closed flat.

Japanese stocks ended lower, dragged by falls in the financial sector, as concerns resurfaced about the health of the US banking sector. Mitsubishi UFJ Financial Group dropped 3.1% and Resona Holdings lost 2.9%. Nikon shed 11.4% after its first-quarter net profit dropped 78% on year. The Nikkei Stock Average fell 0.5% to 32204.33. Meanwhile, the 10 Year yield on Japanese government bonds fell 3.5 basis points to 0.570%.

Indian shares ended higher, reversing early gains, as the market extended its recent range-bound trading pattern. The benchmark Sensex index edged up 0.2% at 65995.81. Steel makers led gains, with JSW Steel rising 2.7% and Tata Steel gaining 1.9%. Automobile makers further supported the market, as Tata Motors advanced 2.6% and Mahindra & Mahindra added 2.35%. Analysts said trading sentiment may be cautious, as investors await the Reserve Bank of India's interest rate decision on Thursday.

Europe

European stocks rose ahead of an expected slightly higher US open, though Asian shares traded mixed. The pan-European Stoxx Europe 600 advanced 0.4%, the German DAX gained 0.5% and the French CAC 40 climbed 0.7%. Tech, banking and oil stocks were among the biggest risers.

"The focus turns to US CPI, published tomorrow, but with recent Fed comments highlighting that policy will remain unchanged for an extended period--barring a rapid deterioration--it will take a big surprise to shift markets," IG analysts wrote.

The United Kingdom’s FTSE 100 closed 0.8% higher, as European markets rallied following a back-pedal by the Italian government on the subject of windfall taxes, IG Group said. On Tuesday, Rome announced plans for a bank tax, but with more detail emerging a calmer atmosphere is prevailing, IG Group analyst Chris Beauchamp said in a market comment.

North America

Rising oil prices lifted energy stocks Wednesday during an otherwise downbeat session.

The S&P 500's energy sector gained 1.2% as Texas crude contracts, the US oil-price benchmark, pushed to a new 2023 high, settling at $84.40 a barrel. Solid American fuel demand and international supply cuts have supported oil prices over the summer despite lagging consumption in China.

More broadly, US equities edged lower. The S&P 500 lost 0.7%, and the Dow Jones Industrial Average gave up 191.13 points, or 0.5%, to end at 35123.36. The tech-focused Nasdaq Composite shed 1.2%, weighed down by sizable drops for major components such as Nvidia, Tesla and Facebook parent Meta Platforms. Meanwhile, Canadian stocks rose, with the S&P/TSX Composite inching 0.3% higher.

Those moves left intact the major indices' drop so far this month, with trading shaded by renewed concerns that ripples from high interest rates are depressing stocks' worth.

Inflation has slinked lower alongside continued job gains in the labor market. But many investors have worried that the Federal Reserve's resolute anti-inflation posture may dampen equities' momentum.

For one thing, the Fed's rate increases over the last 15 months have brought a general risk of financial ruptures that threaten to scuttle economic growth, said David Kelly, chief global strategist at JP Morgan Asset Management.

"It's been 15 years since we've had rates at these levels, and we really don't know whether there's another shoe to drop," Kelly said. On the surface, the banking distress sparked in March looks resolved, but "we're not really sure whether we're completely out of the woods," Kelly said.

Higher rates can pinch stock prices because they offer savers better returns on low-risk securities such as Treasury notes and certificates of deposit. Last Thursday, the yield on the benchmark 10 Year Treasury note finished at its highest level so far this year, with a slight retreat in the days since.

Consumer-price data for July, expected Thursday morning, will help shape the Fed's next move in September. Economists surveyed by The Wall Street Journal are anticipating that core prices moved up 0.2% compared with June's level, a pace that when annualized would keep inflation slightly above the central bank's 2% target.

Fed watchers will also scour Thursday morning's weekly jobless-claims update and producer-price data due Friday.

Stubborn inflation in the months ahead could hold back stock prices even if it does not prompt more Fed rate hikes, said Kristy Akullian, senior investment strategist at BlackRock's iShares. Instead, stocks could suffer if persistent price rises merely delay the central bank's timetable for bringing rates lower again, she said.

Traders are now betting that the target fed-funds rate will end next year more than a full percentage point lower than its anticipated December 2023 level.

A handful of company updates prompted sizable Wednesday stock moves. Penn Entertainment, a casino and gaming operator, gained 9.1% after its Tuesday-evening announcement of a sports-gambling alliance with Walt Disney Co.'s ESPN unit.

WeWork shares fell 39% to close at 13 cents a share after the office-sharing company said that losses and dwindling cash threaten the fate of its business. The company, once privately valued at $47 billion, is now valued at about $275 million.