Australian shares fell in early trade on Friday, hurt most by losses among energy and mining stocks, and a spike in US Treasury yields to 14-month highs.

The S&P/ASX 200 index dropped 1% to 6,745.9 by 2323 GMT. The benchmark index was set to post a 1.3% weekly loss after recording gains in the past two weeks.

Yields on the US benchmark 10-year Treasuries soared to more than 1.75% a day after the US Federal Reserve projected the strongest growth in nearly 40 years and promised to keep interest rates low.

Among sectors and shares, energy stocks declined 2.8% as oil prices plunged on growing worries about demand in Europe due to rising COVID-19 cases.

Gas explorers Woodside Petroleum Ltd and Santos Ltd lost 3.2% and 3.1%, respectively.

Heavyweight mining stocks fell 1.1% as lower copper prices against a stronger dollar and rising bond yields weighed. Global miners BHP Group and Rio Tinto slipped 1.6% and 0.8%, respectively.

Tech stocks dropped 2.2%, mirroring their peers on Wall Street, with buy now pay later co Afterpay and insurance software maker Bravura Solutions falling 2.5% and 2.8% each.

Healthcare stocks also fell, with drug developer CSL Ltd and medical device maker Resmed Inc falling 1.3% and 2.9%, respectively.

Meanwhile, aluminium producer Alcoa Corp said it had signed new five-year electricity supply agreements with AGL Energy, Origin Energy and Alinta Energy for its Portland aluminium smelter in Victoria.

Shares of AGL rose 0.6%, while Origin Energy was down 1.5%.

New Zealand's benchmark S&P/NZX 50 index was nearly unchanged, but the index was on track for a 0.1% weekly loss.