Published on: Amended:
Hong Kong (AFP) – Asian markets were back in negative territory on Wednesday after a rout on Wall Street as traders face a perfect storm of crises, including Covid-related economic woes in China, US interest rate hikes, soaring inflation and the war in Ukraine.
The pessimistic mood across the world has been heightened by weak earnings at some of the world’s biggest companies, while pledges of support from Beijing have largely fallen on deaf ears.
Tech companies, which rely on debt to drive growth, plunged in New York on fears the Federal Reserve is at the start of a period of steep rate hikes aimed at tackling searing inflation.
The numerous problems around the world are acting as a huge drag on sentiment, with many worrying about the global economic outlook.
While around 80% of S&P 500 companies have so far exceeded expectations, National Australia Bank’s Ray Attrill said the failures of top names were attracting attention.
This came “amid growing concerns that corporate earnings, strong as they are now, cannot usurp stiffening (global) economic headwinds resulting primarily from the ongoing war in Ukraine and China’s Covid-zero policy”.
China’s Omicron crisis has seen officials lock down Shanghai, the country’s biggest city, amid fears Beijing could soon follow as infections continue to rise there.
This has raised concerns about already strained supply chains and that a crucial engine of global growth is suffering a severe economic downturn.
Asian markets followed Wall Street.
There was a slight rebound in early trade for Hong Kong and Shanghai following a report that Xi Jinping had pledged to boost infrastructure construction as a means of accelerating the economy.
The comments were the latest from China’s top brass, who have made a series of pledges in recent weeks to revive growth, but analysts said the main cause for concern for investors was the leaders’ refusal to back down on their strategy. Covid.
“The market is no longer reactive as there is no easing from the negative in sight right now,” said Yang Ziyi of Shenzhen Sinowise Investment.
“We just have to wait. We saw the same kind of numbness towards vocal support during the bubble burst of 2015 and in 2018.”
There were also losses in Tokyo, Sydney, Seoul, Singapore, Wellington, Taipei, Manila and Jakarta.
And analysts said there was a lot of uncertainty on the trading floor.
“We know sentiment is in terrible shape right now,” Lori Calvasina of RBC Capital Markets told Bloomberg TV.
“It’s a market that’s very, very confused. There’s just a real lack of conviction in anything people want to buy right now.”
Oil – which has been under pressure in recent days due to concerns over Chinese demand – extended Tuesday’s rebound after Russia threatened to cut gas to Bulgaria and Poland, with bets on further future gains.
Crude “is supported by escalating geopolitical tensions with Russia beginning to cut off gas supplies to the EU. EU is disconnecting gas supplies in a domino effect across the continent,” said Stephen Innes of SPI Asset Management.
“And, of course, the offset is China’s lockdown and all that entails with the oil market desperately trying to get around these recessionary storm clouds looming on the horizon.”
Key figures at 02:30 GMT
Tokyo – Nikkei 225: 1.9% drop to 26,198.79 (pause)
Hong Kong – Hang Seng Index: DOWN 0.4% to 19,856.81
Shanghai – Composite: 0.1% down to 2,882.87%
North Sea Brent Crude: UP 0.6% to $105.64 a barrel
West Texas Intermediate: UP 0.6% to $102.26 a barrel
Euro/dollar: DOWN to $1.0647 from $1.0636 late Tuesday
Pound/dollar: UP to $1.2586 from $1.2576
Euro/pound: UP at 84.59 pence against 84.55 pence
Dollar/yen: UP to 127.55 yen from 127.21 yen
New York – Dow: DOWN 2.4% to 33,240.18 (closing)
London – FTSE 100: UP 0.1% to 7,386.19 (closing)
© 2022 AFP