Asian stocks were in retreat on Wednesday as concerns about the gloomy economic outlook dominated the mood across trading floors, while signs of a fresh crackdown by Beijing on tech firms hit Hong Kong hard.
The region-wide slump came just 24 hours after a mini-revival on Tuesday saw widespread gains as investors took a breather from weeks of negative news.
Japan’s Nikkei index gave up early gains to end lower, as simmering worries about the risk of a recession pushed US stock futures lower after big overnight gains on Wall Street.
The Nikkei share average fell 0.37% to 26,149.55, after rising as much as 0.82% and hitting its highest in almost a week at 26,462.83. The broader Topix also gave up early gains to end 0.19% lower at 1,852.65.
Automakers were among the winners, with the yen near 24-year lows to the dollar – boosting the value of overseas sales.
Toyota added 0.82% and Nissan gained 2.24%. Nissan alliance partner Mitsubishi Motors was the Nikkei’s biggest percentage gainer, up 7.11%.
Most other Asian equity markets fell too, including a sharp decline for Hong Kong’s Hang Seng and a slide for mainland Chinese blue chips.
Market-watchers said that until there’s confirmation that red-hot US inflation has peaked out, the risk that very aggressive Federal Reserve policy tightening could trigger a recession will keep stock markets heavy.
Hong Kong’s benchmark Hang Seng index dropped 2.56% to 21,008.34 points at the close, snapping a three-day rally, while the Hong Kong China Enterprises Index lost 2.84%.
The tech sector was among the biggest loser, with Hang Seng Tech Index plunging 4.37%, after regulators sought public consultation on potentially banning third-party pharmaceutical e-commerce platforms from online drug sales.
Shares of pharmaceutical e-commerce platform operator Alibaba Health Information Technology Ltd closed down 13.85% and its rival JD Health International Inc tumbled 14.84%.
Weather Hits Chinese Shares
Mainland Chinese shares ended lower, as extreme weather in some parts of the country added uncertainty to economic recovery from Covid-19 shocks.
At the market close, the Shanghai Composite Index closed down 1.2% at 3,267.2 points, while the blue-chip CSI 300 index lost 1.27% to 4,270.62.
Elsewhere across the region, equities deepened losses in the later part of the trading session, as inflation and recession worries weighed on sentiment.
The tech-heavy South Korean benchmark dropped 2.7%, followed by a 2.4% fall in Taiwan shares. Stocks in Malaysia and Indonesia lost 1%, while Philippines fell 1.5%. Malaysian palm oil companies skidded after palm oil futures fell over 2%.
Indian stocks fell back too with Mumbai’s signature Nifty 50 index down 1.20%, or 188.15 points, at 15,450.65.
US Bond Yields Drop
Global stock markets and oil prices hit the skids too as the persistent palpitations about rising interest rates and recessions struck again.
“It is remarkable how quickly the market has turned again after that little squeeze up in sentiment yesterday,” Saxo Bank FX strategist John Hardy said.
Those recession worries were also showing in the bond markets, with US and German government bond yields falling as traders sought out traditional safe harbours.
US Federal Reserve chair Jerome Powell is due to start his testimony to Congress on Wednesday with investors looking for further clues about whether another 75-basis-point rate hike is on the cards in July.
Economists polled by Reuters expect the Fed will deliver a 75-basis-point interest rate hike next month, followed by a half-percentage-point rise in September, and won’t scale back to quarter-percentage-point moves until November at the earliest.
The other big move was in commodity markets. The 4% slump in oil prices came amid the recession concerns and with US President Joe Biden expected on Wednesday to call for a temporary suspension of the 18.4-cents a gallon federal tax on gasoline.
Tokyo – Nikkei 225 < DOWN 0.37% at 26,149.55 (close)
Hong Kong – Hang Seng Index < DOWN 2.56% at 21,008.34 (close)
Shanghai – Composite < DOWN 1.20% at 3,267.20 (close)
New York – Dow > UP 2.15% at 30,530.25 (Tuesday close)
- Reuters with additional editing by Sean O’Meara