The major Asia-Pacific share markets fell on Wednesday as swelling borrowing bolstered fears of a global recession, frightening investors into the arms of the safe-haven dollar and driving the Chinese Yuan to record lows. Investors were taking their cues from another rise in U.S. Treasury yields with the benchmark 10-year breaching 4% for the first time since 2010.
Down Across the Board
In Japan, the benchmark Nikkei 225 Index settled at 26173.98, down 397.89 or -1.5%. Hong Kong’s Hang Seng Index is at 17277.98, down 582.67 or -3.26% and South Korea’s KOSPI Index is at 2169.29, down 54.27 or -2.45%.
China’s benchmark Shanghai Index finished at 3045.07, down 48.79 or -1.58% and Australia’s S&P/ASX 200 Index settled at 6462.00, down 34.2 or -0.53%.
Odds of Global Recession Increasing
“It is now clear that central banks in advanced economies will make the current tightening cycle the most aggressive in three decades,” said Jennifer McKeown, head of global economics at Capital Economics. “While this may be necessary to tame inflation, it will come at a significant economic cost.”
“In short, we think the next year will look like a global recession, feel like a global recession, and maybe even quack like one, so that’s what we’re now calling it.”
China Stocks Track Global Peers Lower, Yuan Tumbles to Record Lows
China stocks fell on Wednesday and Hong Kong Shares neared 11-year lows, as fears grew that rapid interest rate hikes would tip the global economy into recession.
Meanwhile, China’s onshore Yuan touched the weakest level against a rising dollar since the global financial crisis of 2008, while its offshore counterpart hit the lowest on record, pressured by expectations of more Federal Reserve rate hikes.
Currency traders said the local currency was reacting to broad greenback strength in global markets as the dollar hit a fresh two-decade peak against a basket of currencies. The dollar has been buoyed by safe-haven demand and a hawkish Fed in recent days.
The declines come even as China’s central bank on Monday announced fresh steps to slow the pace of the Yuan’s recent fall by making it more expensive to bet against the currency.
It’s very difficult to buy Asia-Pacific stocks right now with global investors on edge as surging borrowing costs stoke fears of widespread recession, with most of the world’s major central banks putting their focus squarely on tightening policies to contain super-heated inflation.