BEIJING / HONG KONG – Asian stocks tracked Wall Street sales on Thursday as investors worried about rising global inflation, China’s zero-cue policy and the war in Ukraine, while the safe-haven dollar held its gains overnight.
The broader MSCI index of Asia-Pacific shares outside of Japan snapped its four-day profit streak and fell 2.3%, dragging down losses by 1.6% for Australia’s resource-heavy index, Hong Kong stocks fell 3.3% and mainland China retreated 1%. For chips.
Japan’s Nikkei also fell 2.5%.
The tech giants listed in Hong Kong hit hard, with the index falling 5% on Thursday morning. Tencent shares, in particular, fell more than 7% after reporting flat revenue growth in the first quarter, its worst performance since going public in 2004.
China’s technology sector is still suffering from a year-long government crackdown and slowing economic prospects stemming from Beijing’s strict zero-covid policy, although calming remarks from Vice Premier Liu He to technology executives on Wednesday sparked emotions.
The U.S. and European futures fell on Thursday morning.
Overnight on Wall Street, reports of earnings from retail giants added to concerns that high inflation would slow global growth, with the corporation warning of a large margin injury due to rising fuel and freight costs as it reported that its quarterly profits had halved. The day before, Walmart Inc. had warned of a similar margin squeeze.
Shares of Target plunged 24.88%, the biggest one-day fall since 1987. On Wednesday, the Nasdaq fell nearly 5% while the S&P 500 lost 4%.
“The bounce on Tuesday proved to be ‘overly optimistic’, thus the self-doubt arising from the wrong decision only makes it more difficult for traders to click the sell button,” said Hebe Chen, IG’s market analyst.
“It must be said that inflation concerns have never gone away since we set foot in 2022, but when things have not reached a level of return, they are seemingly going out of control. That, perhaps, is the most worrying part of the market.
The US dollar, which had risen due to a decline in risk appetite, halted its gains on Thursday, with the greenback falling 0.05% against a basket of major currencies. The Japanese yen, on the other hand, lost 0.3% against the dollar.
Data on Wednesday showed that British inflation rose to its highest annual rate since 1982 as fuel bills rose, while Canadian inflation rose 6.8% last month, largely driven by rising food and shelter prices.
Poor U.S. housing data has also added to the slowdown, and Fed Chair Jerome Powell said earlier in the day that U.S. monetary authorities would push interest rates as high as necessary to stem inflation, which he said threatened the foundation’s economy.
Bilal Hafeez, CEO of Macrohive, a London-based research firm, says there is a strong bias towards safe haven resources, especially cash, at the moment.
“Equities may have short-term bounces as in the past few days, but the big picture is that the era of low yields is over and we are transforming into a high-rate environment,” Hafiz told Reuters Global Markets Forum. “This will put pressure on all markets that have benefited from low yields – especially equities.”
US Treasuries rallied overnight and remained largely stable in Asia, leaving the benchmark 10-year Treasury note yield at 2.9076%.
The two-year yield, which was raised by traders in anticipation of higher Fed funds rates, touched 2.6756% compared to the US 2.667% close.
Oil prices rose on Thursday, recovering from initial losses, as long-term fears of a global supply surpassed fears of slowing economic growth.
Brent crude rose 1% to $ 110.42 a barrel, while US crude rose 0.6% to $ 110.2 a barrel.
Gold prices were slightly higher, with spot gold trading at $ 1816.29 an ounce.
(Additional report by Divya Chowdhury; Edited by Sam Holmes and Kenneth Maxwell)