Asian stocks extended their losses on Tuesday amid pessimism about weakening global economic growth as central banks hiked interest rates to curb inflation.
Shanghai, Tokyo, Hong Kong and Sydney declined. Oil prices rose.
Markets are slipping after the US Federal Reserve (FED) raised the key lending rate last week and the European Central Bank (ECB) said there are more rate hikes ahead. This fueled investors’ fears that central bankers might be willing to cause a recession to combat inflation, which has been at its highest levels in decades.
Wall Street slumped for a fifth day on Monday after the Fed said last week that rates may need to stay higher for longer than previously anticipated.
“The weather in the markets reflects a cloudy outlook for the global economy,” Anderson Alves of ActivTrades said in a report.
The Shanghai Composite Index fell 0.6% to 3,087.32 after the World Bank cut its forecast for China’s economic growth for this year to 2.7% from its outlook of 4.3% in June. The bank has cited repeated closures of major cities to combat COVID-19 outbreaks.
In Tokyo, the Nikkei 225 fell 2.4% to 26,575.04 after Japan’s central bank, which avoided joining the Fed and other central banks in rate hikes, widened the range within which it would allow government bond yields to fluctuate. This will make market interest rates rise even higher.
Hong Kong’s Hang Seng fell 1.4% to 19,089.96 and Seoul’s Kospi fell 0.7% to 2,334.05.
In Sydney, the S&P-ASX 200 fell 1.5% to 7,028.40, while the Sensex in India opened at 61,806.19, up 0.8%. New Zealand and Southeast Asian markets fell.
Wall Street’s benchmark S&P 500 index fell 0.9% to 3,817.66. The index is down nearly 20% this year, with less than two weeks to 2022.
The Dow Jones Industrial Average fell 0.5% to 32,757.54. The Nasdaq composite was down 1.5% to 10,546.03.
Shares of communications services, tech companies and retailers slumped. Disney fell 4.8%, Microsoft 1.7% and Home Depot 1.9%.
Facebook’s parent company fell 4.1% after the European Union accused the company of violating antitrust rules by distorting competition in its online classified ads business.
The Fed increased its short-term lending rate by 1.5 percent last week in its seventh increase this year.
The federal funds rate is between 4.25% and 4.5%, a 15-year high. The Fed predicts it will reach the 5% to 5.25% range by the end of 2023. The forecast doesn’t call for an outage before 2024.
Investors have been looking forward to the US economic reports this week for an update on the inflation path. It fell from its peak of 9.1% in June, but remained at 7.1% in November.
The National Association of Realtors reported November home sales on Wednesday. Also Wednesday, the Conference Board is releasing its December consumer confidence report.
On Friday, the government will report consumer spending for November. The report is watched by the Fed as a barometer of inflation.
In energy markets, reference US crude rose 30 cents to $75.68 a barrel on electronic trading on the New York Mercantile Exchange. Brent crude, the base price for international oil trade, rose 20 cents to $80 a barrel in London.
The dollar fell to 133.29 yen from 136.99 yen on Monday. The euro held steady at $1,0604.