Asian shares continued their retreat in the face of ever more gloomy projections of a global slowdown on Thursday while Hong Kong fell to a 13-year low at one point after hopes of more stimulus promises were scuppered.
Investor fears over a looming recession crimped risk appetite, while Treasury yields rose on expectations that the Federal Reserve will remain aggressive in its interest rate hikes.
Japan’s Nikkei share average cut its losses in volatile afternoon trade after a report said China was mulling an easing of Covid-19 rules for visitors.
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The benchmark Nikkei 225 index finished the day down 0.9%, or 250.42 points to end at 27,006.96. The broader Topix index fell 0.5%, or 9.65 points, to 1,895.41.
The Nikkei started the afternoon session by extending a drop from the morning, as it followed Wall Street declines overnight amid simmering fears that aggressive monetary tightening by the Federal Reserve and many of its global peers could trigger a recession.
World bond markets also buckled, with US 10-year Treasury yields surging to new multi-year highs, giving the US dollar new momentum that carried it to a fresh 32-year high to the yen just below 150.
The upward pressure on Japanese government bond yields forced the Bank of Japan, which is alone among developed-market central banks still pursuing stimulus, to step into the market and defend its yield cap.
The psychologically key 27,000 level continues to be a focus for investors, said Masahiro Ichikawa, chief market strategist at Sumitomo Mitsui DS Asset Management, and the Nikkei crossed that line several times on Thursday in seeking out a direction.
“But the downside should be limited,” Ichikawa said. “The earnings season will get going properly next week, so market players are likely to shift to a wait-and-see stance.”
The only winning sectors on the index were energy, which rose 0.8% amid a climb in crude oil prices, and financials, which were up 0.2% as higher long-term rates boosted the profit outlook from lending.
Hang Seng Hits 13-Year Low
Shares in Hong Kong dropped to their lowest level since the end of the global financial crisis as investors showed their disappointment at the absence of any economic stimulus plans, or some easing of Xi’s disruptive zero-Covid strategy, at the the 20th Chinese Communist party congress in Beijing.
The benchmark Hang Seng index fell as much as 3% to its lowest level since May 2009 and the Hang Seng Tech index was also down as much as 4.8% after the Nasdaq Golden Dragon index, which follows Chinese tech groups trading in the US, slumped more than 7% on Wednesday.
MSCI’s broadest index of Asia-Pacific shares outside Japan fell to a more than two-year low of 436.0 and was down 1.6% at 437.16.
The Hang Seng Index recovered some of those losses late on to close 1.4% down, or 231.06 points, at 16,280.22.
US Dollar Firms
On the mainland, China kept its benchmark lending rates unchanged for a second straight month as authorities held off unleashing more monetary stimulus to avoid stark policy divergence with other major economies.
The Shanghai Composite Index dipped 0.3%, or 9.33 points, to 3,035.05, while the Shenzhen Composite Index on China’s second exchange dropped 0.5%, or 10.17 points, to 1,971.67.
Elsewhere across the region, Australia’s S&P/ASX 200 index was 1.1% lower while Indian stocks edged ahead with Mumbai’s signature Nifty 50 index up 0.04%, or 6.60 points, at 17,518.85.
Globally, in the currency markets, the US dollar firmed as investors flocked to the safe haven after inflation data across the world raised the prospect of central banks continuing with interest rate hikes.
The US central bank is widely expected to raise rates by 75 basis points for the fourth straight time at its November meeting.
The rise in the dollar and yields pushed gold lower, with prices lingering at a three-week trough on Thursday.
Key figures
Tokyo – Nikkei 225 < DOWN 0.92% at 27,006.96 (close)
Hong Kong – Hang Seng Index < DOWN 1.4% at 16,280.22 (close)
Shanghai – Composite < DOWN 0.3% at 3,035.05 (close)
London – FTSE 100 < UP 0.03% at 6,927.24 (0940 BST)
New York – Dow < DOWN 0.33% at 30,423.81 (Wednesday close)
- Reuters with additional editing by Sean O’Meara
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Yen Sinks Below 150 to Dollar, Market Watch for Intervention
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