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Shares fall as fears of global growth increase

FILFOTO – An investor sits in front of a board showing stock information at a brokerage office in Beijing, China, December 7, 2018. REUTERS / Thomas Peter

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BEIJING / HONG KONG, MAY 19 (Reuters) – Asian stocks plummeted on Thursday, following a sharp sell-off on Wall Street, as investors worried about global inflation, China’s zero-COVID policy and the Ukraine war, while the safe haven the dollar eased.

European stock markets also seemed to be going through a tough day. The pan-region Euro Stoxx 50 futures fell 0.52%, German DAX futures were down 0.63% while FTSE futures were 0.51% lower.

Nasdaq futures fell 0.15%, although S & P500 futures reversed previous losses to be 0.05% higher.

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Overnight on Wall Street, retail giant Target Corp (TGT.N) warned of a larger margin due to rising costs when it reported that its quarterly profit was halved. The shares fell 24.88 percent. The Nasdaq fell almost 5% while the S&P 500 lost 4%.

“Tuesday’s setback was proven to be ‘too optimistic’, and therefore the self-doubt stemming from the misjudgment only makes traders click the sales button even harder,” said Hebe Chen, market analyst at IG.

MSCI’s widest index of Asia-Pacific equities outside Japan (.MIAPJ0000PUS) took four days to rise, falling 1.8%, down by a loss of 1.5% for Australia’s resource-heavy index (.AXJO), a fall of 2 .1% in Hong Kong shares. (.HSI) and a 0.3% decline in mainland China’s blue chips (.CSI300).

Japanese Nikkei (.N225) fell 1.7%.

Technical giants listed in Hong Kong (.HSTECH) were particularly hard hit, with the index falling more than 3%. Tencent (0700.HK) fell more than 6% after not reporting any revenue growth in the first quarter, the worst result since it was listed in 2004. read more

China’s technology sector is still struggling after years of government collapse and declining economic prospects stemming from Beijing’s strict zero-COVID policy, although reassuring comments from Deputy Prime Minister Liu He to technical leaders had boosted sentiment on Wednesday. read more

Two US central banks say they expect the Federal Reserve to slow down to a more measured pace of policy tightening after July, as it seeks to curb inflation without raising borrowing costs so high that it sends the economy into recession. read more

It must be said that the concern about inflation has never gone away since we entered 2022. But even though things have not reached the point of no return, they are apparently heading in the direction of ‘out of control’. Probably the most worrying part for the market, “said IGs Chen.

The US dollar, which had risen due to falling risk appetite, fell 0.15% against a basket of major currencies, after a 0.55% jump overnight that ended a three-day losing streak.

The Aussie gained 0.8%, while New Zealand’s kiwi jumped 0.6% more, as a relief in Shanghai’s COVID locking helped sentiment.

Data on Wednesday showed that British inflation rose to the highest annual rate since 1982 as energy bills rose, while Canadian inflation rose to 6.8% last month, mainly driven by rising food and housing prices.

Bilal Hafeez, CEO of the London-based research firm MacroHive, said there was a strong bias towards safe harbor assets right now, especially cash.

“There may be short-term upswings in stocks like the last few days, but the big picture is that the era of low interest rates is over and we are moving to an environment of higher interest rates,” Hafeez told the Reuters Global Markets Forum.

“This will push all the markets that profited from low returns – especially equities.”

US government bonds rose overnight and were largely stable in Asia, leaving the benchmark index for 10-year government bonds at 2.9076%.

The two-year yield, which is rising with traders’ expectations of higher Fed fund yields, reached 2.6800% compared to a US close of 2.667%.

Oil prices recovered from early losses, as persistent fears of tight global supplies outweighed fears of lower economic growth.

Brent oil rose 1.2% to $ 110.41 a barrel, while US oil rose 0.8% to $ 110.48 a barrel.

Gold was a little lower. Spot gold was trading at $ 1814.88 per ounce.

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Additional reporting by Divya Chowdhury; Edited by Sam Holmes, Kenneth Maxwell and Kim Coghill

Our standards: Thomson Reuters Trust Principles.

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