HONG KONG : Asian markets were weaker on Friday as investors braced for a U.S. rate hike next week amid growing concerns of a global recession following warnings from the World Bank and the International Monetary Fund.
MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.3 per cent on Friday, after U.S. stocks ended the previous session with mild losses. The index is down 4.1 per cent so far this month.
Australian shares were down 0.94 per cent on Friday, while Japan’s Nikkei stock index slipped 1.2 per cent.
Hong Kong’s Hang Seng Index was down 1.1 per cent while China’s CSI300 Index was 0.86 per cent lower.
The weaker session followed broad declines across the major U.S equities markets.
The Dow Jones Industrial Average fell 173.27 points, or 0.56 per cent, to 30,961.82, the S&P 500 lost 44.66 points, or 1.13 per cent, to 3,901.35 and the Nasdaq Composite dropped 167.32 points, or 1.43 per cent, to 11,552.36.
The global economic outlook remains downbeat and some countries are expected to slip into recession in 2023, but it is too early to say if there will be a widespread global recession, the IMF said on Thursday .
The IMF in July revised down global growth to 3.2 per cent in 2022 and 2.9 per cent in 2023. It will release a new outlook next month.
In comparison, the World Bank said the world could be edging towards a global recession in 2023 as central banks across the world simultaneously hike interest rates to combat persistent inflation.
The world’s three largest economies – the United States, China, and the euro zone – have been slowing sharply, and even a “moderate hit to the global economy over the next year could tip it into recession,”, it said.
Indermit Gill, the World Bank’s chief economist, said on Thursday he was concerned about “generalized stagflation,” a period of low growth and high inflation, in the global economy, noting the bank had pared back forecasts for a majority of countries.
In Asian trade, the yield on benchmark 10-year Treasury notes stood at 3.4509 per cent compared with its U.S. close of 3.459 per cent on Thursday.
The two-year yield, which rises with traders’ expectations of higher Fed fund rates, touched 3.871 per cent compared with a U.S. close of 3.873 per cent.
Two-year Treasury yields hit a new 15-year high after mixed U.S retail sales and jobless claims data, which analysts said reinforced the case for aggressive Federal Reserve rate hikes.
Markets are currently fully pricing in a 75 basis point rate hike next week, economists said.
“Equities and other risk-sensitive markets struggle as it becomes clear that US inflation pressures are well embedded and that risks to the fed funds rate lie to the upside,” ANZ economists said on Friday.
The dollar dropped 0.4 per cent against the yen to 142.95 .
The euro was up 0.1 per cent on the day at $1.0006, having lost 0.51 per cent in a month, while the dollar index, which tracks the greenback against a basket of currencies of other major trading partners, was up at 109.59.
U.S. crude ticked up 0.14 per cent to $85.22 a barrel. Brent crude rose to $90.98 per barrel.
Gold was slightly lower. Spot gold was traded at $1662.49 per ounce.
(Editing by Ana Nicolaci da Costa)