Photo: Richard Drew, Associated Press
BEIJING (AP) – Asian stock markets followed Wall Street lower Thursday after the Dow Jones Industrial Average plunged to raise fears of a recession.
Market benchmarks in Shanghai, Tokyo and Hong Kong all withdrew.
US investors dumped stocks and sent the Dow its biggest one-day fall of the year after the return on the 10-year Treasury crossed a threshold that has correctly predicted many previous recessions.
Weak economic data from Germany and China signaled a global downturn. This erased the gain from the day before from a meeting that started after President Donald Trump delayed customs duties of about $ 160 billion in Chinese goods due to effect September 1.
The markets are increasingly anxious for the lack of signs of progress toward settling the US-Chinese tariff war over trade and technology.
"US recession risk has increased from US aggressive trade policy towards China which has harmed the rest of the world," said Eugene Leow and Philip Wee of DBS Group in a report.
Shanghai Composite Index 0.9% to 2,782.67 and Tokyo's Nikkei 225 fell 1.3 to 20,392.99. Hong Kong's Hang Seng lost 0.1% to 25,271.23.
Australia's S&P-ASX 200 fell 2.2% to 6,447.60. Markets in Taiwan, New Zealand and Southeast Asia also declined.
The South Korean markets were closed for a holiday.
On Wall Street, the benchmark Standard & Poor's 500 fell 2.9% to 2,840.60. Dow dropped 800.49 points, or 3%, to 25,479.42. The Nasdaq composite lost 3% to 7,773.94.
Also on Wednesday, the European markets fell after Germany's economy fell 0.1% in the spring due to the global trade war and the turmoil in the automotive industry. In China, the world's second-largest economy slowed down, growth in factory production, retail spending and investment in July.
Technical stocks and banks led the wide sale. Dealers came under particularly strong sales pressure after Macy issued a nasty revenue report and cut its full-year forecast.
Investors have been plowing money into the security of US government bonds for months amid mounting turmoil that weakness in the global economy may sap US growth.
Uncertainty about the US-Chinese customs war spurred stock market volatility in August. The Dow has fallen more than 5% and the S&P 500 more than 4%.
Traders tend to shift money to the security of US government bonds when they are afraid of a financial downturn. That causes the market price to rise and give – the difference between today's rate and payment when the bond matures – to shrink.
When returns on long-term Treasurys fall below short-term bond prices, economists call it a "reverse yield curve." It suggests that bond investors expect growth to slow down so much that the Federal Reserve feels compelled to cut short-term interest rates to support the economy.
The return on the 10-year Treasury fell from 2.02% on July 31 to below 1.60%. On Wednesday, it fell short of the two-year Treasury for the first time since 2007.
Each of the last five times the two-year and 10-year Treasury has turned, a recession has followed.
AUSTRALIAN JOBS: Australia admitted stronger than expected 41,000 jobs in July, rebounding from last month's contraction. Unemployment remained stable at 5.2%.
ENERGY: U.S. Benchmark crude lost 28 cents to $ 54.95 a barrel of e-commerce on the New York Mercantile Exchange. The contract fell $ 1.82 on Wednesday to close at $ 55.23. Burnt crude, which used to price international oils, fell 40 cents to $ 59.08 a barrel in London. It lost $ 1.82 last year to $ 59.48.
CURRENCY: The dollar rose to 105.93 yen from Wednesday's 105.86 yen. The euro went up to $ 1.1142 from $ 1.1138.