The Australian sharemarket is bracing for another tough start to the week after Wall Street closed sharply lower on Friday due to fears the US economy might tip into a recession.

The futures market for the ASX 200 is pointing to a 1.26 per cent drop at open on Monday amid increasing concerns about the state of the global economy and the performance of US stock markets.

Wall Street tumbled on Friday, capping a troubling week for investors. Dow Jones Industrial index fell 486.27 points, or 1.62 per cent, to end at 29,590.41 – the lowest level since November 2020. The blue-chip heavy index’s closing figures were just shy of the level required for it to be classified as a bear market, that is a 20 per cent decline from the market high on January 4.

The S&P 500 and the Nasdaq are already in bear market territory. On Friday, they notched up more losses, with the S&P closing down 1.72 per cent and Nasdaq off 1.8 per cent.

The indexes’ declines on Friday capped off a poor week for US markets, with the Nasdaq losing 5.03 per cent during the week, while the S&P fell 4.77 per cent and the Dow was 4 per cent lower.

In Australia, the benchmark S&P/ASX200 index on Friday closed down 125.5 points, or 1.87 per cent, to 6574.7. The broader All Ordinaries dropped 132.7 points, or 1.92 per cent, to 6788.7.

Those losses were driven by a larger-than-expected rate hike of 75 basis points by the Federal Reserve during the week on the back of a high inflation print of 8 per cent.

Federal Reserve chair Jerome Powell acknowledged this week that there was a chance the US economy could slip into a recession as inflation remained stubbornly high.

“It’s very hard to say with precise certainty the way this is going to unfold,” Powell said this week.