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Asia Stocks Slide as Recession Fears, Dismal Data Dominate

Mainland China stocks bucked the trend as easing Covid curbs boosted confidence but the region’s bourses are still set for half-yearly losses


Asian investors targeted more robust stocks on Monday as cautious bargain-buying took place ahead of the release of key US consumer data this week.
Stock quotation boards are seen at the Tokyo Stock Exchange. Photo: Reuters.

 

Asian stocks were in retreat as downbeat forecasts about global growth weighed on sentiment, though mainland China shares were lifted by easing Covid curbs and signs of recovery.

Fears of recession continue to dominate on trading floors and nearly all stock markets across Asia are set for half-yearly losses. MSCI’s broadest index of Asia-Pacific shares outside Japan eased another 0.5%, bringing its losses for the quarter to 10%.

The S&P 500 was down slightly overnight and is on track for its worst first-half performance in more than 50 years amid fears that central banks’ measures to combat soaring inflation could lead to a recession.

 

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Japan’s stocks dropped off the back of poor factory data and Hong Kong slipped too, though mainland China stocks gained with data there showing a pick-up in services activity.

Tokyo lost more than 1.5% after data showed that monthly industrial production fell the most in two years and the yen weakened to a 24-year low overnight, stoking fears of an economic slowdown.

The Nikkei share average fell steadily throughout the day and lost 1.54% by the end of trading. The broader Topix index was down 1.20% on the day.

Earlier, Japan’s Ministry of Economy, Trade and Industry released data that showed industrial production fell 7.2% in May, the second straight monthly decline and the biggest monthly drop in two years.

“May’s weaker-than-expected industrial production cast a shadow,” Kazuo Kamiya, a strategist at Nomura Securities, said. “The market is in a position where negative factors are likely to be reflected.”

Automakers and other exporters have been hit by shortages of parts and complications from the Covid-19 lockdowns in China.

Toyota Motor Corp, the world’s largest car manufacturer, was down 1.32% after the company missed its May production target, which had already been revised downward.

 

China Stocks Boosted by Covid Easing

Across the East China Sea, China stocks marked their best month in nearly two years, supported by signs of an economic recovery after the easing of Covid-19 restrictions.

By the end of the session, Shanghai Composite index rose 1.1% to 3,398.62 points, while blue-chip CSI300 index gained 1.44% to 4,485.01 points. Both indexes recorded their biggest monthly gains since July 2020.

However, in Hong Kong, the benchmark Hang Seng Index slipped 0.62% to 21,859.79 points at the close, while Chinese H-shares listed in Hong Kong edged down 0.36% to 7,666.88 points.

Gains across the board came as official data showed that China’s factory and service sectors snapped three months of activity decline in June, as authorities lifted a strict Covid lockdown in Shanghai, reviving output and consumer spending.

Tourism and liquor sectors were among the biggest winners as easing coronavirus restrictions boosted investor sentiment. An index tracking tourism-related companies jumped 4.1% at close.

Stocks elsewhere across the region were mixed with Philippine stocks and Thai stocks shedding 2.3% and 0.8%, respectively, while Malaysia rose 1.1%.

Indian stocks were down with Mumbai’s signature Nifty 50 index off 0.03%, or 5.10 points, at 15,794.00.

 

Global Stocks in Record Drop

Globally, stocks sank to extend what is the worst first half of the year for global share prices on record, as investors fret that the latest show of central bank determination to tame inflation will slow economies rapidly.

Central bank chiefs from the Federal Reserve, European Central Bank and Bank of England met in Portugal this week and voiced their renewed commitment to control inflation no matter what pain it caused.

By 0740 GMT, the MSCI World Equity Index was down 0.48%, bringing its year-to-date losses to more than 20% – the worst fall since the index’s creation.

US futures also fell, with little sign yet that the new quarter will bring in brave bargain hunters. This year’s dramatic slide in asset prices has been led by tech-heavy indexes and stocks more sensitive to rising interest rates.

Traders are now focused on data on US core prices due later today that are expected to underline the extent of the inflation challenge.

Oil prices, which have soared in 2022 along with most commodity prices, edged lower amid concerns about an unseasonable slowdown in US fuel demand.

OPEC and OPEC+ end two days of meetings on Thursday with little expectation they will be able to pump much more oil despite US pressure to expand quotas.

Brent slipped 0.8% to $115.33 a barrel, while US crude declined 0.47% to $109.27.

 

Key figures

Tokyo – Nikkei 225 < DOWN 1.54% at 26,393.04 (close)

Hong Kong – Hang Seng Index < DOWN 0.62% at 21,859.79 (close)

Shanghai – Composite > UP 1.10% at 3,398.62 (close)

New York – Dow > UP 0.27% at 31,029.31 (Wednesday close)

 

  • Reuters with additional editing by Sean O’Meara

 

 

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Sean O'Meara

Sean O'Meara is an Editor at Asia Financial. He has been a newspaper man for more than 30 years, working at local, regional and national titles in the UK as a writer, sub-editor, page designer and print editor. A football, cricket and rugby fan, he has a particular interest in sports finance.

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