Key Points:

• Equity benchmarks across the region diverge after US declines
• Investors balance weak China data with easing of Covid rules

Equity benchmarks in Australia and Korea fell, shares in Hong Kong and mainland China wavered and Japanese equities clung to a small advance. Futures contracts for European stocks and the S&P 500 edged higher. The US stock benchmark fell 1.4% Tuesday for its fourth consecutive decline, the worst run in a month.

The dollar and Treasuries held on to Tuesday gains. Australian bonds followed the rally in Treasuries wiping 4 basis points from the 10-year yield to 3.36%. The Australian dollar maintained its advance after third-quarter gross domestic product missed estimates. 

Wall Street turned risk-off as a host of US banks sounded the alarm about the gloomy outlook. Goldman Sachs Group Inc.’s David Solomon warned about pay and job cuts, citing “some bumpy times ahead.” Bank of America Corp. is slowing hiring ahead of a possible economic contraction. Morgan Stanley will reduce its global workforce, while JPMorgan Chase & Co.’s Jamie Dimon told CNBC a “mild to hard recession” may hit next year.

Oil fell further after touching the lowest level since last December on Tuesday as investors pared back crude positions amid a broader market sell-off. The decline for West Texas Intermediate, which settled near $74 on Tuesday, erased all of this year’s gains.

Morgan Stanley Wealth Management’s Lisa Shalett said on Bloomberg Television that some of the biggest companies may see earnings hit far more than expected next year as economic growth slows and inflation erodes the purchasing power of consumers.

“We have not yet seen the bottom on equity prices,” said Lauren Goodwin, portfolio strategist at New York Life Investments. “While this phase of equity market volatility is likely to end in the next few months, earnings have not yet adapted to a recessionary environment.”