Asia stocks edge down after Wall Street sell-off

Asian shares followed Wall Street lower after US stocks recorded their worst day in two months, as investors were unnerved by economic data suggesting interest rates have further to rise after months of increases by the Federal Reserve.

Japan’s benchmark Topix index fell 1 per cent, while China’s CSI 300 index of Shanghai- and Shenzhen-listed stocks fell 0.5 per cent and Australia’s S&P/ASX 200 fell 0.4 per cent.

The falls in Asia came after Wall Street’s blue-chip S&P 500 index closed down 2 per cent on Tuesday, with declines in every sector, while the tech-focused Nasdaq Composite shed 2.5 per cent. They marked the steepest daily losses for both indices since December 15.

The latest rout in global stocks was triggered by stronger-than-expected economic readings from the US and Europe, which prompted concerns that central banks might be forced to tighten monetary policy further to subdue inflation.

The S&P Global US composite purchasing managers’ index notched a preliminary reading of 50.2 for February, just above the 50-point line separating growth from contraction and reflecting the strongest reading in eight months. Markets had expected the gauge to come in at 47.5.

Stephen Innes, managing partner at SPI Asset Management, said the strong PMI data pointed to “considerable momentum behind the growing consensus that the Fed will hold rates higher for longer in a more robust economic environment”.

In sovereign debt markets, yields on benchmark 10-year US Treasuries fell 0.02 percentage points to 3.9369 per cent on Wednesday in Asia but remained near the highest levels since November on expectations that the Fed would be forced to continue raising interest rates.

Yields on interest rate-sensitive two-year notes fell 0.05 percentage points to 4.679 per cent after touching a three-month high on Tuesday.

“If you compare sentiment to one month ago, people were expecting the Fed might only have a little room left to hike,” said Dickie Wong, head of research at Kingston Securities. “But now it looks like inflation may not ease up and the Fed will have to raise rates repeatedly.”

Futures markets suggested the pace of selling in global stocks would slow or reverse when markets opened in London and New York on Thursday. The FTSE 100 was tipped to shed 0.2 per cent, while the S&P 500 was expected to rise by the same amount.

In Hong Kong, the benchmark Hang Seng index pulled back from early losses to be up 0.2 per cent after the government announced it would give out consumption vouchers worth HK$5,000 (US$640) to all adult residents to support the city’s recovery from an economic slump induced by pandemic restrictions.