Australian shares are set to open sharply lower on Thursday, following steep falls in global equity markets, as growing fears of a looming recession in the world's largest economy is expected to dent local sentiment.

Yields on two-year US Treasury notes rose above the benchmark 10-year yield for the first time since June 2007, a closely-watched metric for recession signals.

The local share price index futures fell 2.1% to 6,400, a 195.9-point discount to the underlying S&P/ASX 200 index close. The benchmark closed 0.4% higher on Wednesday.

New Zealand's benchmark S&P/NZX 50 index was down 1.2% to 10,722.13 in early trade.