Asian stocks slide, bond yields depressed as recession worries weigh

Asian stocks and US equity futures sank on Thursday while bonds and the safe-haven US dollar and Japanese yen were bid as mounting evidence of a US slowdown fueled worries about a possible global recession. Crude oil also weakened.

Equity investors were inclined to take money off the table after recent strong gains and with many global markets heading into a holiday for Good Friday, when potentially pivotal US monthly payrolls data is due.

Japan's Nikkei (. N225) fell 1.3%, making it the region's worst performing major market alongside South Korea's Kospi (. KS11), which sank the same amount.

Chinese blue chips (. CSI300) eased 0.36%. Hong Kong's Hang Seng (. HSI) sagged 0.37%, with tech shares on the index down 1% (. HSITECH)

MSCI's broadest index of Asia-Pacific shares (. MIAP00000PUS) was down 0.9%, accelerating declines as the trading day unfolded. The index had risen more than 5% since mid-March to close at a 1 1/2-month high on Tuesday.

US Nasdaq E-mini futures pointed to a 0.44% lower restart, after the tech stock benchmark slumped 1% overnight. E-mini futures for the broader S&P 500 indicated a 0.26% decline at the reopen, extending Wednesday's 0.25% slide.

"Cracks have started to appear in the US economic data this week, and slowdown fears are re-emerging," spurring investors to sell riskier assets and shift to safer ones, including Treasuries and the dollar, IG analyst Tony Sycamore wrote in a client note.

"It makes sense to square some risk ahead of the Easter long weekend," he said. "All eyes are now on Friday's non-farm payrolls release."

Data overnight showed US private employers hired far fewer workers than expected in March, adding to signs of a loosening labor market from earlier in the week.

The country's services sector also slowed more than expected, while earlier figures showed a stalling at factories as well.

As signs have built this week for a sharp US slowdown, traders have been pricing for a more dovish Federal Reserve. Money markets now see the odds of a further quarter point hike at the May meeting versus a pause as a coin toss. And 71 basis points of easing are priced by year-end.

"Until last week, I think some stocks, including tech, were more driven by expectations for Fed rate cuts to come earlier (but) now global recession fears are the overwhelming factor," said Naka Matsuzawa, chief Japan market strategist at Nomura Securities in Tokyo.

"I don't think anyone at the Fed has even hinted at starting rate cuts this year, so in that sense the market is kind of challenging the Fed."

Treasury yields have fallen, with the 10-year note yielding around 3.29% in Tokyo, sticking close to the nearly seven-month low of 3.266% reached overnight.

That helped the yen, which is highly sensitive to US yields, to gain against the fellow safe-haven greenback.

The dollar slipped 0.08% to 131.22 yen, but was higher against most other major currencies. The dollar index rose 0.14% to 102.01, continuing its bounce from a two-month low.

The risk-sensitive, commodity-linked Australian and New Zealand dollars slid 0.47% and 0.43% respectively against their US peer. The euro was off 0.16% at $1.08915.

Crude oil was also under pressure, with West Texas Intermediate losing 73 cents to $79.88 a barrel and Brent off 74 cents at $84.25.

 

Reuters