Asia stocks extend market rout on inflation and growth fears; STI down 0.4%

Japan's Nikkei index lost 2.3 per cent. PHOTO: AFP

HONG KONG (BLOOMBERG, REUTERS) - A slump in stocks extended into Asia on Thursday (May 19) after mounting fears of an economic downturn hit Wall Street shares and spurred a flight to havens including sovereign bonds.

Asia stock indices pared heavy losses from earlier in the morning as sentiment steadied somewhat, with Japan's Nikkei index down 1.85 per cent at 1pm Singapore time, after tumbling 2.6 per cent.

Singapore's Straits Times Index dropped 1.4 per cent on opening, but was down just down 0.4 per cent by midday.

Hong Kong's Hang Seng Index lost 2.25 per cent while the Shanghai Composite Index dipped 0.08 per cent. 

Tech giants listed in Hong Kong were hit hard on Thursday, with Tencent shares plunging 8 per cent after it reported flat revenue growth in the first quarter, its worst performance since going public in 2004.

China's technology sector is still reeling from a year-long government crackdown and slowing economic prospects stemming from Beijing's strict zero-Covid policy, even though soothing comments from Vice Premier Liu He to tech executives had buoyed sentiment on Wednesday.

 Australia's S&P/ASX 200 fell 1.6 per cent and South Korea's Kospi index shed 1.2 per cent.

US stock futures were mildly in positive territory after suffering their worst drop since 2020.

On Wednesday, the S&P 500 index plunged 4 per cent, the biggest daily drop in almost two years, and a more than 5 per cent tumble in the technology-heavy Nasdaq 100 index.

Earnings reports from consumer stalwarts stoked worries that high inflation is weighing on margins and consumer spending. Target Corp plunged the most since Black Monday in 1987, a day after Walmart also spiralled lower.

United States Federal Reserve officials reaffirmed that sharply tighter monetary policy lies ahead to cool economic activity and get price pressures under control.

Chicago Fed president Charles Evans said raising interest rates somewhat above the neutral level and stopping there should help bring inflation down.

The challenge from inflation for bellwether retailers weakens the argument that corporate earnings can help stem this year's rout in stocks. Instead, global equities are sliding toward a bear market as recession fears mount.

"We are pricing in a growth scare," RBC Capital Markets' Lori Calvasina told Bloomberg TV. "The market is trying to find a bottom here. There is a lot of uncertainty in this market right now about whether or not that recession is going to come through or if it's going to be another near-death experience."

The safe-haven US dollar held most of its strong overnight gains

US Treasuries rallied overnight and were largely steady in Asia, leaving the yield on benchmark 10-year Treasury notes at 2.9076 per cent. The two-year yield, which rises with traders' expectations of higher Fed fund rates, touched 2.6756 per cent compared with a US close of 2.667 per cent.

Oil prices climbed, recovering from early losses, as lingering fears over tight global supplies outweighed fears over slower economic growth.

Brent crude rose 1 per cent to US$110.42 per barrel, while US crude was up 0.6 per cent to US$110.2 a barrel.

Gold was slightly higher, with spot gold trading at US$1816.29 per ounce.

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