Asian stocks fall further amid recession, rate hike fears

By Ambar Warrick

Investing.com -- Most Asian stock markets sank on Friday, extending losses into a third straight session as concerns over an economic slowdown were exacerbated by weak data, while hawkish signals from the Federal Reserve also rattled sentiment.

China’s Shanghai Shenzhen CSI 300 and Shanghai Composite indexes were the worst performers for the day, down over 1% each as concerns over a mixed economic recovery in the country soured sentiment towards local stocks.

While the Chinese economy grew more than expected in the first quarter, the manufacturing sector continued to struggle.

Data also showed that foreign direct investment in China grew much less than expected in March, reflecting some doubts over just how much the economy will rebound this year.

Japan’s Nikkei 225 index fell 0.2% as data showed consumer price index inflation remained sticky through March. The reading puts more pressure on the Bank of Japan to eventually tighten policy, despite dovish signals from new Governor Kazuo Ueda.

Business activity in the country also continued to weaken, with preliminary data on manufacturing and service sector activity missing estimates in April.

Technology-heavy Asian markets fell tracking weak cues from Wall Street, with Hong Kong’s Hang Seng index and South Korea’s KOSPI losing about 0.6% each.

The Taiwan Weighted index also fell 0.1%, taking little support from Taiwan Semiconductor Manufacturing Co (TW:2330), even as the firm logged better-than-expected first-quarter earnings.

India's Nifty 50 and BSE Sensex 30 indexes were flat in early trade, while Australia's ASX 200 index fell 0.4%.

Broader Asian markets retreated as softer-than-expected U.S. manufacturing data pushed up fears of a slowdown in the world’s largest economy. This was accompanied by signs of a cooling labor market.

A weak overnight session on Wall Street also provided negative cues for Asian markets, following a string of softer-than-expected earnings, particularly in electric carmaker Tesla Inc (NASDAQ:TSLA). Losses in Tesla spilled over to several Chinese EV makers.

Hawkish signals from Federal Reserve officials continued to rattle sentiment, with policymakers calling for more rate hikes to curb relatively high inflation.

Philadelphia Fed President Patrick Harker warned on Thursday that U.S. interest rates will likely rise further and remain there for longer, even as economic activity cools. The Fed’s Beige Book, released earlier this week, painted a dour picture of the world’s largest economy.

Markets are now positioning for one more rate hike by the Fed in May, and are somewhat conflicted over a potential pause in June.