Most Asian stock indices fell on Wednesday, as mounting concerns about the global economy prompted investors to dump riskier assets in favor of safe havens such as the US dollar and government bonds.
Financial markets grapple with multiple risks, including the prospects of sharp US interest rate increases, a sharp slowdown in China, rising inflation, and war in Ukraine, Reuters reports.
European markets seemed about to follow Asia’s lead. In early trade, pan-Euro Stoxx 50 futures slipped 0.38% to 3,641. FTSE futures slipped 0.12% to 7,351.
News that Russia had briefly cut off gas supplies to Poland deepened fears, sending the MSCI global stock index down to a 13-month low.
There was little slowdown in selling in Asia, with the broadest MSCI index of Asia Pacific shares outside Japan dropping 0.76% to its lowest level since March 15. The Nikkei in Tokyo was down 1.4%.
Affected Chinese stocks bucked the trend, rising 1.14% as sentiment got a short-term boost from data showing industrial earnings growth at a faster pace in March than a year earlier.
Chinese stocks fell to their lowest level in two years, on Tuesday, on fears that the continued shutdowns of the Covid-19 virus will severely affect its economic activity and disrupt global supply chains.
Analysts noted the overall “loss of confidence” investors were feeling in the Chinese government, saying more “concrete measures to support the market and the economy” were needed.
“Once there is a way to get back to normal life out of these shutdowns, we will likely see a huge catalyst that will allow consumers to come back for retaliation, and that’s when we see investors regain confidence,” said Jim McCafferty, managing director. For equity research in the Asia Pacific region at Nomura.
Russia, which is demanding payment for its gas in rubles with sanctions over its invasion of Ukraine, said it would halt supplies to Poland and Bulgaria from Wednesday.
The move, which was seen as a major escalation, sent oil and gas prices higher. Brent crude futures rose 0.3 percent to $105.31 a barrel by 0451 GMT. US West Texas Intermediate crude futures rose 0.2% to $101.80.
The dollar settled at 102.39 against a basket of rival currencies, its strongest level since March 2020, while gold fell 0.46% to $ 1896.76.
Safety flows also supported the Japanese yen, which moved away from recent lows to a one-week high of 126.96 and enjoyed its best day over the struggling British pound in more than two years overnight.
Analysts say markets are concerned that the expected series of interest rate hikes by the US Federal Reserve may hurt growth only when many economies are beginning to recover from the recession caused by the pandemic.
Investors were also concerned about volatile commodity prices due to the Russia-Ukraine war, with the International Monetary Fund this week warning of the risks of stagflation in Asia.
The heavy selling on Wall Street overnight underlined investors’ concern about earnings taking a hit, with the Nasdaq down 4%, its lowest since late 2020.
After the market closed, Alphabet Inc, Google’s parent company, reported its first quarterly revenue loss from the pandemic and fell about 3%. Microsoft Corp slipped 4% ahead of its results, but rebounded once it forecast double-digit revenue growth next year.
Nasdaq futures rose 0.33%.
10-year Treasury yields rose slightly to 2.7704%.