Asian stocks sink again as inflation panic grips world markets

Asian markets swing as traders mull dark outlook

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HONG KONG: Asian markets were volatile on Wednesday, with little sign of easing the recent sluggish performance as investors remained concerned about the economic outlook due to inflation, rising interest rates, a slowdown in China and the impact of the war in Ukraine.

A slew of weak global indicators and gloomy forecasts from major companies have cooled trading floors in recent weeks and warned of a potential global recession as soaring prices begin to weigh on consumer confidence.

The tech sector is once again in the firing line after Snap, the parent company of social media app Snapchat, offered a bleak economic outlook, sending its shares plunging more than 40%.

Wall Street giants followed Snap’s decline, with Facebook’s parent Meta and Google’s Alphabet both falling.

Tokyo, Hong Kong and Jakarta were down while Shanghai, Sydney, Seoul, Singapore, Taipei and Manila rose.

The mood was not helped by news that US new home sales tanked in April while the Richmond Fed manufacturing index also fell, with both at the lowest levels since the pandemic began in 2020.

“The market is moving its focus — and has been for the last month or so — from inflation concerns to growth concerns,” said Ellen Hazen, of FL Putnam.

Investors are now wearily anticipating the Fed’s next interest rate move, with the Fed expected to raise rates by a further half a percentage point as officials struggle to bring inflation down from a four-year high.

There was a tinge of hope after a policymaker, Atlanta Fed President Rafael Bostic, said it might make sense to pause rate hikes in September as the bank tries to avoid a recession.

National Australia Bank’s Tapas Strickland said while it was not clear that the Fed was close to being more supportive of markets, “it is clear that growth headwinds are becoming more evident in the data, particularly stemming from the profit reporting season”.

“The Fed of course remains focused on inflation, but if inflation reads were to start to moderate, then Bostic has opened up the possibility of a Fed pause.”

Meanwhile, China continues to struggle with the fast-spreading Omicron variant, with leaders sticking to their zero-Covid strategy despite the dire impact on the economy of lockdowns.

And with no easing of that policy in sight, observers warned that a series of recent support measures would not be enough to lift optimism.

“Fiscal multipliers will be minimal in an economy where economic interaction and activity have slowed sharply,” said Stephen Innes of SPI Asset Management.

“Moving beyond mobility restrictions in short order is a pre-condition, but not a guarantee, for an Asia-led economic recovery.”

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