What you need2know:

• SPI futures down 54 to 5516

• AUD at 92.91 US cents, 95.58 Japanese yen, 69.41 Euro cents and 55.04 British pence.

• On Wall St, S&P 500 -2%, Dow -1.9%, Nasdaq -2.1%

• In Europe, Euro Stoxx 50 -1.7%, FTSE -0.6%, CAC -1.5%, DAX -1.9%

• Spot gold fell 0.9% to $US1284.29 an ounce

• SIron ore slips 0.3% to $95.60 per metric tonne

• Brent oil down 0,7% to $US105.74 per barrel

What’s on today

Australia:Ai Group manufacturing PMI, RBA July commodity price index, ResMed reports earnings;

China: July purchasing managers index;

Bank of Japan governor Haruhiko Kuroda speaks;

US: July non-farm payrolls, July ISM manufacturing report.

Stocks to watch

ResMed reports fourth-quarter earnings

Macquarie Group has shed a $60 million stake in toll road owner Macquarie Atlas Roads in a block trade through the bank’s securities unit on Thursday night.

RBC Capital Markets has retained a “sector perform” on Duet Group and boosted its 12-month price target from $2.15 a share to $2.50 a share.

Deutsche Bank has a “hold” recommendation on CSL and a 12-month target price of $73.20 a share.

Currencies

Benchmark US 10-year notes were little changed to yield 2.56 per cent, after earlier rising as high as 2.61 per cent, the highest since July 8.

The US dollar index, which measures the dollar against a basket of six major currencies, was last up 0.03 per cent at 81.460. The index posted its biggest monthly gain in nearly 1-1/2 years, rising more than 2 per cent in July.

"It's hard to be a dove in these circumstances and that's what the market is picking up on," said Steven Englander, global head of G10 foreign exchange strategy at CitiFX in New York, in reference to the Fed's stance on monetary policy.

Analysts have said the Fed may take a more hawkish stance on raising interest rates at its September policy meeting in light of the recovering US economy. Higher rates are expected to boost the dollar by driving capital flows into the United States.

Commodities

Zinc fell after inventories rose, highlighting an overhang of supplies that analysts say needs to be eroded before mine closures create an expected shortage. Benchmark zinc on the London Metal Exchange closed at $US2355 a tonne.

US oil and gas company Apache, under pressure from an activist investor, said it plans to sell interests in two liquefied natural gas projects, including Australia’s Wheatstone.

The aluminium market outside China is set to record its first deficit in nine years in 2015 following production cuts and an Indonesian ore export ban, a new Thomson Reuters GFMS poll has found.

United States

The S&P 500 posted its worst daily decline since April and first monthly drop since January on Thursday as economic data sparked concern that the Federal Reserve could raise interest rates sooner than some have expected.

Data showing that US labour costs recorded their biggest gain in more than 5-1/2 years in the second quarter came a day after the Fed upgraded its assessment of the US economy while reiterating it was in no hurry to raise rates.

On Thursday, all 10 macro S&P 500 sectors ended down on the day, with energy down 2.4 per cent and leading the decline. Exxon Mobil's second-quarter earnings beat expectations, but its shares fell 4.2 per cent to $98.94.

The CBOE Volatility index jumped to its highest level since April.

Europe

European shares fell sharply on Thursday, with the euro zone’s blue-chip index slipping to a three-month low, on concerns of an earlier than expected interest rate hike in the Uniteed States and a debt default by Argentina.

Lisbon stocks fell 3.12 per cent, driven by what was at one point a 45-per cent nosedive in shares of stricken Portuguese bank Banco Espirito Santo (BES), which posted a record first-half loss of €3.57 billion late on Wednesday.

Spanish stocks came under severe pressure, with Madrid’s IBEX dropping 2.1 per cent, as traders cited worries over Spanish companies’ exposure to Latin America after Argentina defaulted on its debt on Thursday.

What happened yesterday

Shares posted their strongest month this calendar year, with the benchmark S&P/ASX 200 Index climbing 4.4 per cent over July, continuing a bull run despite concerns global equities are vulnerable to a correction.