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Asian stocks plunge after Wall Street sell-off on inflation, COVID | financial markets

Asian stocks slid Thursday, following a steep Wall Street sell-off as investors worried about global inflation, China’s zero-COVID policy and the war in Ukraine, while the safe-haven dollar slipped.

European equity markets also faced another tough day. Euro Stoxx 50 pan-regional futures were down 0.52 percent, German DAX futures FDXc1 were down 0.63 percent, while FTSE futures FFIc1 were down 0.51 percent.

Nasdaq futures were down 0.15 percent, although S&P500 ESc1 futures reversed earlier losses and were 0.05 percent higher.

Overnight on Wall Street, retail giant Target Corp warned of a major margin slump on rising expenses as it reported its quarterly profit halved. Its shares plunged 24.88 percent. The Nasdaq fell nearly 5 percent while the S&P 500 lost 4 percent.

“Tuesday’s rebound has been proven to be ‘too optimistic,’ so self-doubt resulting from misjudgment only makes traders hit the sell button even harder,” said Hebe Chen, market analyst at IG.

MSCI’s broadest index of Asia-Pacific stocks outside Japan posted four days of gains, falling 1.8 percent, offset by a 1.5 percent loss for Australia’s resource-intensive index, down 2.1 percent blue chips were dragged down by Hong Kong stocks and a 0.3 percent decline in mainland China.

The Japanese Nikkei lost 1.7 percent.

The tech giants listed in Hong Kong were hit particularly hard, with the index falling by more than 3 percent. Tencent fell more than 6 percent after reporting no revenue growth in the first quarter, its worst performance since going public in 2004.

China’s tech sector is still suffering from years of government crackdown and a slowing economic outlook attributed to Beijing’s strict zero-COVID policy, though Vice Premier Liu He’s reassuring comments to tech leaders on Wednesday boosted sentiment.

Two US central bankers say they expect the Federal Reserve to ease into a more dovish pace of monetary tightening after July as it seeks to quell inflation without raising borrowing costs to the point of sending the economy into recession .

“fear of inflation”

“It has to be said that concerns about inflation have never gone away since the start of 2022. Although things haven’t reached the point of no return, they seem to be heading towards “out of control”. That’s probably the most worrying part for the market,” IG’s Chen said.

The US dollar, which had rallied on falling risk appetite, slipped 0.15 percent against a basket of major currencies after rising 0.55 percent overnight, ending a three-day losing streak.

The Aussie gained 0.8 percent as an easing of the COVID lockdown in Shanghai helped sentiment.

Data on Wednesday showed that British inflation rose to its highest annual rate since 1982 when energy bills soared, while Canadian inflation rose to 6.8 percent last month, mainly due to rising food and housing prices was.

Bilal Hafeez, CEO of London-based research firm MacroHive, said there is a strong bias towards safe-haven assets, particularly cash, at the moment.

“There may be short-term rallies in equities like the last few days, but broadly the low yield era is over and we are moving to a higher interest rate environment,” Hafeez told the Reuters Global Markets Forum.
“This will pressure all markets that have benefited from low yields – especially equities.”

US Treasuries rallied overnight and remained broadly stable in Asia, keeping the benchmark 10-year Treasury yield at 2.9076 percent.
The two-year yield, which rises on traders’ expectations for higher Fed fund rates, hit 2.6800 percent, compared to a US close of 2.667 percent.

Oil prices rebounded from early losses as ongoing fears over tight global supplies outweighed fears of slowing economic growth.

Brent crude rose 1.2 percent to $110.41 a barrel, while US crude CLc1 rose 0.8 percent to $110.48 a barrel.

Gold was slightly lower. Spot gold was trading at $1814.88 an ounce.

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