By Kanupriya Kapoor
(Reuters) – Most Asian stock indices fell on Wednesday as growing fears about the global economy prompted investors to dump riskier assets in favor of safe havens such as the U.S. dollar and government bonds .
Financial markets are grappling with multiple risks, including the prospect of aggressive interest rate hikes in the United States, a sharp slowdown in China, a spike in inflation and war in Ukraine.
European markets looked set to follow Asia lower. At the start of trade, pan-regional Euro Stoxx 50 futures slid 0.38% to 3,641. FTSE futures fell 0.12% to 7,351.
News that Russia had briefly cut off gas supplies to Poland added to concerns, sending the MSCI global stock index to a 13-month low.
There was little slowdown in sales in Asia, with MSCI’s broadest index of Asia-Pacific stocks outside Japan falling 0.76% to its lowest level since March 15. The Tokyo Nikkei fell 1.4%.
Australian equities also fell 0.67% as inflation hit a 20-year high and brought closer to rising interest rates.
Beaten Chinese stocks bucked the trend, gaining 1.14% as sentiment was boosted in the short term by data showing that industrial company profits rose at a faster pace in March compared to a year earlier. .
Chinese stocks fell to their lowest level in two years on Tuesday on fears that lingering COVID-19 lockdowns could weigh heavily on its economic activity and disrupt global supply chains.
Analysts pointed to an overall “loss of confidence” investors felt in the Chinese government, saying more “tangible steps are needed to support the market and the economy”.
“Once there is a way back to normal to get out of these lockdowns, then we could potentially see a big stimulus that would allow consumers to come back with a vengeance and that’s when we’ll see the investors regain confidence,” said Jim McCafferty, chief executive. for Asia-Pacific equity research at Nomura.
Russia, which has demanded payments for its gas in rubles as sanctions against its invasion of Ukraine bite, said it would halt deliveries to Poland and Bulgaria from Wednesday.
The move, seen as a major escalation, pushed up oil and gas prices. Brent crude futures rose 0.3% to $105.31 a barrel at 0451 GMT. U.S. West Texas Intermediate crude futures rose 0.2% to $101.80.
The dollar settled at 102.39 against a basket of rival currencies, its highest level since March 2020, while gold fell 0.46% to $1,896.76.
Security flows also supported the yen, which pulled back from recent lows to a one-week high of 126.96 and overnight saw its best day against the struggling pound in more than two years.
Analysts say markets fear a series of rate hikes expected by the U.S. Federal Reserve could hurt growth just as many economies have begun to recover from the crisis caused by the pandemic.
Investors are also worried about volatility in commodity prices due to the Russian-Ukrainian war, with the International Monetary Fund warning this week of risks of stagflation in Asia.
The overnight selloff on Wall Street underscored investor concern over the impact on earnings, as the Nasdaq fell 4%, its lowest since the end of 2020.
After the market closed, Google’s parent company, Alphabet Inc, reported its first quarterly shortfall from the pandemic and was down about 3%. Microsoft Corp tumbled 4% ahead of its results but rallied after forecasting double-digit revenue growth next year.
Nasdaq futures rose 0.33%.
Yields on the benchmark 10-year treasury bills rose slightly to 2.7704%.
(Editing by Kim Coghill)