Shares slide as global growth fears mount
By Stella Qiu and Alun John
BEIJING/HONG KONG, May 19 (Reuters) - Asian stocks slid on Thursday, tracking a steep Wall Street selloff, as investors worried about global inflation, China's zero-COVID policy and the Ukraine war, while the safe-haven dollar eased.
European equity markets also looked set for another rough day. The pan-region Euro Stoxx 50 futures STXEc1 fell 0.52%, German DAX futures FDXc1 were down 0.63% while FTSE futures FFIc1 were 0.51% lower.
Nasdaq futures .NQcv1 eased 0.15%, although S&P500 futures ESc1 reversed earlier losses to be 0.05% higher.
Overnight on Wall Street, retail giant Target Corp TGT.N warned of a bigger margin hit due to rising costs as it reported its quarterly profit had halved. Its shares plunged 24.88%. The Nasdaq fell almost 5% while the S&P 500 lost 4%.
"The bounce on Tuesday was proven to have been 'too optimistic', thus the self-doubt stemming from the misjudgement only makes traders click the sell button even harder," said Hebe Chen, market analyst at IG.
MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS snapped four days of gains and slumped 1.8%, dragged down by a 1.5% loss for Australia's resource-heavy index .AXJO , a 2.1% drop in Hong Kong stocks .HSI and a 0.3% retreat in mainland China's bluechips .CSI300 .
Japan's Nikkei .N225 shed 1.7%.
Tech giants listed in Hong Kong .HSTECH were hit particularly hard, with the index falling more than 3%. Tencent 0700.HK sank more than 6% after it reported no revenue growth in the first quarter, its worst performance since going public in 2004.
China's technology sector is still reeling from a year-long government crackdown and slowing economic prospects stemming from Beijing's strict zero-COVID policy, even though soothing comments from Vice Premier Liu He to tech executives had buoyed sentiment on Wednesday.
Two U.S. central bankers say they expect the Federal Reserve to downshift to a more measured pace of policy tightening after July as it seeks to quell inflation without lifting borrowing costs so high that they send the economy into recession.
"It must be said that the concern for inflation has never gone away since we stepped into 2022. However, while things haven't reached the point of no return, they are seemingly heading in the direction of 'out of control'. That is probably the most worrying part for the market," IG's Chen said.
The U.S. dollar =USD , which had rallied on falling risk appetite, eased 0.15% against a basket of major currencies, after a 0.55% jump overnight that ended a three-day losing streak.
The Aussie AUD=D3 gained 0.8%, while New Zealand's kiwi NZD=D3 bounced 0.6% to, as an easing in Shanghai's COVID lockdown helped sentiment.
Data on Wednesday showed that British inflation surged to its highest annual rate since 1982 as energy bills soared, while Canadian inflation rose to 6.8% last month, largely driven by rising food and shelter prices.
Bilal Hafeez, CEO of London-based research firm MacroHive, said there was a strong bias toward safe-haven assets right now, particularly cash.
"There may be short-term bounces in equities like the last few days, but the big picture is that the era of low yields is over, and we are transitioning to a higher rates environment," Hafeez told the Reuters Global Markets Forum.
"This will pressure all the markets that benefited from low yields - especially equities."
U.S. Treasuries rallied overnight and were largely steady in Asia, leaving the yield on benchmark 10-year Treasury US10YT=RR notes at 2.9076%.
The two-year yield US2YT=RR , which rises with traders' expectations of higher Fed fund rates, touched 2.6800% compared with a U.S. close of 2.667%.
Oil prices recovered from early losses, as lingering fears over tight global supplies outweighed fears over slower economic growth.
Brent crude LCOc1 rose 1.2% to $110.41 per barrel, while U.S. crude CLc1 was up 0.8% to $110.48 a barrel.
Gold was slightly lower. Spot gold XAU= was traded at $1814.88 per ounce.
World FX rates YTD Link
Global asset performance Link
Asian stock markets Link
Additional reporting by Divya Chowdhury; Editing by Sam
Holmes, Kenneth Maxwell and Kim Coghill
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