Asian stocks slipped on Wednesday with investors preoccupied by rising tensions between the world’s superpowers and fears that unrelenting interest rate rises in the US will hamper the global recovery.
China and Hong Kong stocks finished lower, as sabre rattling by both US President Joe Biden and Russian leader Vladimir Putin on the first anniversary of Russia’s invasion of Ukraine sparked a Wall Street selloff which dragged on Asia’s markets
Japan’s Nikkei share average ended at a one-month low amid the threats and warnings from the US and Russian leaders and over worries that US rate hikes will end up slowing down the world’s economy.
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Ratcheting up geopolitical tensions, Russian President Vladimir Putin suspended Russia’s last major nuclear arms treaty with the United States.
The Nikkei lost 1.34% to close at 27,104.32, its lowest since January 23, and posted its steepest daily decline since January 19. The broader Topix fell 1.11% to 1,975.25.
Bellwether stocks such as job search provider Recruit Holdings and Uniqlo owner Fast Retailing were among the biggest drags on the market.
Market participants were also nervous ahead of Japanese inflation data due on Friday and central bank governor nominee Kazuo Ueda’s appearance before parliament on the same day.
The yen was also under pressure, as was the Japanese bond market following an unexpected rebound in US business activity that raised expectations that the Federal Reserve will further raise interest rates this year.
Meanwhile, a survey on Tuesday showed Japan’s manufacturing activity contracted at its fastest pace in 30 months in February and on Wednesday a Reuters poll showed manufacturers’ mood was gloomy and service sector sentiment slid for a second month.
Wall Street Low Point
China’s markets endured a tough day, too, following Wall Street into the red over fears that central banks will have to lift interest rates further.
China’s blue-chip CSI300 Index lost 0.90%, while the Shanghai Composite Index dipped 0.47%, or 15.38 points, to 3,291.15.
The Hang Seng Index was down 0.51%, or 105.65 points, to 20,423.84, while the Hang Seng China Enterprises Index dropped 1.33%. The Shenzhen Composite Index on China’s second exchange slipped 0.27%, or 5.95 points, to 2,159.82.
Elsewhere across the region, Seoul, Jakarta and Manila were down, while there were also losses in Sydney, Singapore, Wellington, Mumbai, Bangkok and Taipei.
MSCI’s broadest index of Asia-Pacific shares outside Japan fell 1.02%, touching its lowest since January 6.
Wall Street posted its worst performance of the year on Tuesday, with an unexpectedly strong reading from S&P Global’s composite PMI showing the US economy was not cooling yet.
“It concerns the market that central banks will have to hike rates a lot more to curb inflation,” said Kerry Craig, JPMorgan Asset Management’s global market strategist.
“I think the greater concern at the moment is around the earnings outlook and how much that is really going to fall from here … against the uncertainty around the probability of a recession in the US.”
Putin Warns West
Meanwhile, Russian President Vladimir Putin delivered a warning to the West over Ukraine by suspending its last major nuclear arms control treaty with the United States. US Secretary of State said Putin’s move was “deeply unfortunate and irresponsible”.
“This [nuclear pact suspension] has spurred the next leg of escalation concerns, invoking a response from President Biden in Poland saying that Russia will never win the war and pledging more support to Ukraine,” Saxo Markets APAC strategy team said in client note.
“The focus is now on China which needs to back up its peace treaty words with action after being accused of supplying arms to Russia.”
E-mini futures for the S&P 500 rose 0.16%. US 10-year notes touched 3.966%, the highest since November, before easing to yield 3.948% on Wednesday.
The dollar index was flat, but analysts expect interest rate rises to lift the currency, hurting emerging market equities, which benefit from a falling dollar.
US crude fell 0.46% to $76.01 per barrel and Brent was at $82.74, down 0.37%. Spot gold added 0.1% to reach $1,835.28 an ounce.
Key figures
Tokyo – Nikkei 225 < DOWN 1.34% at 27,104.32 (close)
Hong Kong – Hang Seng Index < DOWN 0.51% at 20,423.84 (close)
Shanghai – Composite < DOWN 0.47% at 3,291.15 (close)
London – FTSE 100 < DOWN 1.03% at 7,895.46 (0935 GMT)
New York – Dow < DOWN 2.06% at 33,129.59 (Tuesday close)
- Reuters with additional editing by Sean O’Meara
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