Australian shares have fallen, with mining and gold stocks supporting the benchmark index, even as risk appetite remained weak after investors weighed expectations of an outsized rate hike from the US Federal Reserve this week.
The ASX 200 closed down 19 points or 0.3 per cent to 6,720.
By 4:18pm AEST, the Australian dollar was flat at 66.87 US cents.
Globally, investors remained on the sidelines ahead of the Fed policy meeting, where the US central bank is likely to announce a 75-basis-point hike, while a section of the market believes that an outsized 100 bps rate will be necessary to tame soaring price pressures.
Back home, miners gained 0.1 per cent, despite lower iron ore prices in China. But sector majors Rio Tinto, Fortescue Metals and BHP shed between 0.1 per cent and 1 per cent.
The gold sector jumped 1.2 per cent, as bullion prices steadied amid a weaker US dollar.
Shares of Newcrest Mining and Northern Star Resources rose 1.7 per cent and 2.8 per cent, respectively.
The financial sub-index finished the session flat.
Lake Resources turned out to be the top gainer, climbing as much as 12.4 per cent, after the lithium miner said work was proceeding at its Kachi project in Argentina, days after warning of a dispute with mining partner Lilac Solutions.
Energy stocks lost 1.1 per cent, with index heavyweights Woodside Energy and Santos dropping 1 per cent and 0.8 per cent, respectively.
Separately, Origin Energy (-0.9pc) said it would divest its entire stake in the Betaloo Basin for $60 million, while also intending to exit its upstream exploration permits.
Sayona Mining plunged 8.6 per cent, Qube Holdings dropped 5 per cent, Magellan lost 5.8 per cent and Block shed 4.5 per cent.
US stocks down
Wall Street's major indexes closed lower on Friday while US Treasury prices climbed as investors' fears about the prospects for a global recession intensified while they also prepared for a massive US interest rate hike from the Federal Reserve.
Economic fears were amped up by a FedEx revelation late on Thursday that a global demand slowdown had accelerated at the end of August and was on pace to worsen in the November quarter, prompting the delivery company to withdraw its financial forecasts.
The warning came at a time when investors were already jittery ahead of a Fed meeting after which the central bank is widely expected to raise rates by 75 basis points. Some traders are betting on a 100 basis points increase, according to CME Group's FedWatch tool. The Bank of Japan and Bank of England are also due to meet next week.
"Today [Friday] is a continuation of what we've seen this week, the volatility around the expectations for what the Federal Reserve may do, with 75 basis points baked in and 100 basis points a possibility," said Megan Horneman, chief investment officer at Verdence Capital Advisors.
"Then you have the dismal report out of FedEx, which some people consider a bellwether not only for consumer spending but also the broad economy."
The stock market is down on a "growing concern that's really starting to escalate that the Fed is going to make a mistake and overtighten", said Jim Paulsen, chief investment strategist at The Leuthold Group in Minneapolis.
Paulsen said the FedEx warning had led investors to ask, "what if the Fed's going to tighten right into a recession?".
Treasury yields fall
But Treasury yields retreated after the FedEx warning revived the notion that slower growth will help the Federal Reserve tame inflation.
After increasing to 3.924 per cent, its highest level since 2007, earlier in the day, the two-year US Treasury yield, a bellwether for interest rate expectations, fell.
The yield curve inversion between the two-year and 10-year notes — seen as a recession harbinger — widened further before returning to Thursday's closing level.
The two-year's yield last fell 0.4 basis points to 3.869 per cent and the 10-year yield slid 0.6 basis points to 3.453 per cent.
"The Fed will view the FedEx report as an indication that they are on the right path, rather than a warning that the Fed may be moving too aggressively," said Rick Meckler, a partner at Cherry Lane Investments in New Vernon, New Jersey.
In equities, the Dow Jones Industrial Average fell 139 points, or 0.5 per cent, to 30,822; the S&P 500 lost 28 points, or 0.7 per cent, to 3,873; and the Nasdaq Composite dropped 104 points, or 0.9 per cent, to 11,448.
The pan-European STOXX 600 index had lost 1.6 per cent and MSCI's gauge of stocks across the globe shed 1 per cent.
On Friday, the European Central Bank's vice president said an economic slowdown in the euro zone would not be enough to control inflation and the bank will have to keep raising rates.
Oil prices rose slightly on Friday as a spill at Iraq's Basra terminal appeared likely to constrain crude supply, but the commodity remained down for the week on fears rate increases would curb global economic growth and fuel demand
By 4.32pm AEST, Brent crude oil was flat, trading at $US91.35 a barrel.
ABC/Reuters
