Australia

Australian shares are set to fall after US markets dropped on expectations that US interest rates will higher for longer.

ASX futures were down 1.4% or 97 points as of 8:30am on Friday, suggesting a lower open.

US stocks extended recent losses as investors come around to believe the Fed is ready to hold rates higher for longer, while rising Treasury yields make them a more attractive alternative.

Data support the theory that the economy remains resilient as initial jobless claims fell to 201,000, below the consensus estimate of 225,000.

In commodity markets, Brent crude oil slipped 0.2% to US$93.30 a barrel while gold was flat at US$1,920.23.

In local bond markets, the yield on Australian 2 Year government bonds was up at 4.06% while the 10 Year yield was also up at 4.30%. US Treasury notes were higher, with the 2 Year yield at 5.14% and the 10 Year yield at 4.49%.

The Australian dollar was unchanged at 64.12 US cents. The Wall Street Journal Dollar Index, which tracks the US dollar against 16 other currencies, was flat at 99.55.

Asia

Chinese shares ended lower, in tandem with other markets in the region. Sentiment has been weighed by ongoing concerns over economic growth and the Fed's hawkish rate pause after officials hinted at another rate hike in the coming months. Losses were broad-based, with consumption stocks and automakers declining the most. China Tourism Group Duty Free shed 3.3%, BYD dropped 1.8 and Great Wall Motor fell 2.8%. The only bright spots today were hardware makers and telcos. ZTE rose 2.4% and China Telecom gained 0.8%. The benchmark Shanghai Composite Index closed 0.8% lower at 3084.70. The Shenzhen Composite Index fell 0.8% and the tech-heavy ChiNext Price Index declined 1.0%.

Hong Kong shares closed lower after the U.S. Federal Reserve took a hawkish pause in its tightening cycle, but signaled it is prepared to raise rates once more this year to combat inflation. The benchmark Hang Seng Index closed 1.3% lower at 17655.41, while the Hang Seng Tech Index ended 1.85% lower. The technology and health sectors led losses. Alibaba Group and Meituan fell 2.2% and 2.4%, respectively, while Alibaba Health Information lost 4.86%. Few stocks gained, with Chow Tai Fook Jewellery the only stock rising above 1%.

Japanese stocks ended lower, dragged by declines in electronics and pharmaceutical shares, as prospects of the Fed's further tightening push up borrowing costs. Yaskawa Electric shed 4.3% and Eisai lost 4.0%. The Nikkei Stock Average fell 1.4% to 32571.03. The 10-year Japanese government bond yield rose 2.5 basis points to 0.745%, the highest level since September 2013. Investors are focusing on Treasury yields and economic data for their policy implications.

India's Sensex fell 0.85% to end at 66230.24, tracking losses across other regional equity markets, with the banking sector dragging down the benchmark index. Asian stocks likely face some pressure in the very near term after the FOMC's hawkish tone, Nomura analysts wrote in a research note. Mahindra & Mahindra led losses, dropping 3.1%, while ICICI Bank was down 2.8%. The tech sector gained, with Tech Mahindra rising 1.5%. Meanwhile, eMudhra rose 2.5% and Ramco Systems was 2.3% higher.

Europe

European stocks dropped as investors pondered the possibility of an extended period of higher interest rates. The Stoxx Europe 600, DAX and CAC 40 fell more than 1%. Brent crude gained 0.4% to $93.87 a barrel, but oil stocks traded mixed and online grocer Ocado slumped 20% after a reported downgrade to underperform by BNP Paribas Exane. On Wednesday, the US Federal Reserve kept interest rates unchanged, but left the door open to at least one more rate hike this year, with rate cuts becoming less likely, investment manager EdenTree says. "This hawkish signaling is likely to keep the lid on any market exuberance," EdenTree fixed-income fund manager Michael Sheehan writes.

The FTSE 100 closed down 0.7% despite the short-lived boost stocks enjoyed after the Bank of England voted to keep its key interest rate unchanged at 5.25%, ending a run of 14 consecutive rises. The index is feeling pressure from the U.S. where the Federal Reserve has signaled rates will remain high for longer in 2024. "'Higher for longer' is the theme from all central banks at the moment, but it is the Fed that has really spelled doom for risk appetite," IG analyst Chris Beauchamp says in a note. Ocado was the session's biggest faller, down 20%, followed by Flutter, down 3.5% and Croda International, down 3.5%.

North America

US stocks extended recent losses as investors come around to believe the Fed is ready to hold rates higher for longer, while rising Treasury yields make them a more attractive alternative. Data support the theory that the economy remains resilient as initial jobless claims fell to 201,000, below the consensus estimate of 225,000.

Shares of Cisco fall 3.9% after the network equipment provider said it plans to buy cybersecurity firm Splunk for $28 billion in cash, spurring some hope for a return of large M&A. DJIA fell 1%, or 370 points, to 34070, the S&P 500 lost 1.6% to 4330 and the Nasdaq dropped 1.8% to 13223.