Asian stocks lose gains made on shorter China quarantine as recession fears persist

Asian stocks lose gains made on shorter China quarantine as recession fears persist
FILE PHOTO: A man wearing a protective mask, amid the coronavirus disease (COVID-19) outbreak, looks at an electronic board displaying Japan’s Nikkei index outside a brokerage in Tokyo, Japan, March 7, 2022. REUTERS/Kim Kyung-Hoon

TOKYO : Asian stock markets fell on Wednesday, extending Wall Street’s overnight losses amid concerns over inflation and the possibility of recession, which also boosted the safe-haven dollar.

Japan’s Nikkei index fell 0.98 per cent, while MSCI’s broadest index of Asia-Pacific shares outside Japan fell 1.37 per cent, dragged lower by Australian shares, off 0.81 per cent, and Korea’s KOSPI, down 1.54 per cent.

Asian shares had ended the Tuesday session on an upward trajectory after China announced an easing of its quarantine requirements for inbound passengers, in what some observers saw as the biggest relaxation so far of its “zero COVID” strategy.

But the positive impact had petered out on Wednesday.

“Inevitably, markets tend to overreact to these sorts of news,” said Carlos Casanova, senior economist at UBP in Hong Kong. “In order for that to be sustainable, we really want to see these measures materialise into actual reopening.”

Chinese blue chips, which hit a four month high the day before, lost 1.16 per cent while the Hong Kong benchmark fell 1.83 per cent. [.SS]

EUROSTOXX 50 futures were down 0.57 per cent and FTSE futures lost 0.68 per cent before European markets opened.

The losses in Asia followed a turbulent day on U.S. markets, with the S&P 500 index down more than 2 per cent after data showed U.S. consumer confidence dropped to a 16-month low in June due to fears high inflation could cause the economy to slow significantly in the second half of the year.

“It’s all pointing to rising expectations of an economic slowdown, potentially a recession in the US economy, maybe as soon as this year,” said Casanova.

Renewed worries over the potential for a global recession drove investors into the safe haven dollar, and the dollar index remained firm at 104.5.

The euro dropped 0.6 per cent on the greenback overnight, and was little changed in Asia at $1.0506. The Japanese yen stood at 136.03 per dollar, not far off last week’s 24-year low of 136.7.

The yen has struggled as the Bank of Japan keeps monetary policy loose even as other major banks tighten, a point reiterated by BOJ governor Haruhiko Kuroda on Wednesday.

The yield on 10-year U.S. Treasury notes fell seven basis points to 3.134 per cent.

Oil prices fell back slightly after three sessions of gains, but global supply tightness limited the losses. An overnight report suggested that Saudi Arabia and the United Arab Emirates are unable to raise output significantly in the near future.

Brent crude futures fell 0.86 per cent on the day to $116.96 a barrel. U.S. crude was down 0.72 per cent to $110.94.

Spot gold was flat, gaining 0.07 per cent to trade at $1,820.7600 an ounce.


Source: Reuters