SINGAPORE- Asia’s stockmarkets wobbled lower on Wednesday as reality bit on hopes for a soft economic landing in the United States, and investors curbed their enthusiasm about China’s reopening.
The S&P 500 had dropped for a fourth straight session overnight and the brakes have come on a rally that has lasted almost two months. Oil also fell sharply and, with Brent futures LCOc1 at $79.50 a barrel, is back where it began the year.
MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.4 percent and Japan’s Nikkei fell 0.5 percent.
“Some of the optimism that had driven the rally is being put to the test,” said Shane Oliver, head of investment strategy at Australia’s AMP.
“We might be transitioning from a situation of worrying about inflation and interest rates, to one where the negatives become weakening growth and falling profits.”
Facebook parent Meta also dragged down markets, with shares sliding 6.8 percent, following reports that European Union regulators have ruled the company will need to ask users before running advertising based on their personal data.
In the United States, big banks are bracing for a worsening economy next year as inflation and rate rises threaten consumer demand, with top executives at Goldman Sachs, J.P. Morgan and Bank of America all sounding downbeat in remarks on Tuesday.
“Economic growth is slowing,” said Goldman Sachs CEO David Solomon. “When I talk to our clients, they sound extremely cautious.”
The growth fears rallied longer-dated bonds and helped the safe-haven US dollar to pause its recent retreat.
The yield on benchmark 10-year US Treasuries fell 8.6 basis points to 3.513 percent overnight and was last at 3.5442 percent. That is more than 80 bps below the two-year yield as investors reckon on high rates hurting growth.
Traders in Asia are intently weighing prospects for loosening in China’s COVID-19 controls and what that means for the world’s second-biggest economy and regional demand.
