Asian Stocks Lose Gains Made in Shorter China Quarantine as Recession Fears Persist

A man wearing a protective mask, amid the coronavirus disease (COVID-19) outbreak, looks at an electronic board showing Japan’s Nikkei index outside a brokerage house in Tokyo, Japan, on March 7, 2019. 2022. REUTERS/Kim Kyung-Hoon

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TOKYO, June 29 (Reuters) – Asian stock markets fell on Wednesday, extending Wall Street’s overnight losses amid concerns about inflation and the possibility of a recession, also boosting the safe-haven dollar.

Japan’s Nikkei index fell 0.98%, while the broader index of MSCI Asia-Pacific stocks outside of Japan (.MIAPJ0000PUS) fell 1.37%, dragged lower by Australian stocks (.AXJO)with 0.81% less, and Korea’s KOSPI (.KS11)1.54% less.

Asian stocks ended Tuesday’s session on an upward trajectory after China announced an easing of its quarantine requirements for incoming passengers, in what some observers saw as the biggest easing yet of its “zero COVID” strategy. read more

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But the positive impact had been exhausted by Wednesday.

“Inevitably, markets tend to overreact to this kind of news,” said Carlos Casanova, senior economist at UBP in Hong Kong. “In order for that to be sustainable, we really want to see these measures materialize into an actual reopening.”

chinese blue chips (.CSI300)which hit a four-month high the previous day, lost 1.16%, while the Hong Kong benchmark (.HSI) fell 1.83%.

EUROSTOXX 50 futures were down 0.57% and FTSE futures lost 0.68% before European markets opened.

The losses in Asia followed a turbulent day in US markets, with the S&P 500 index falling more than 2% after data showed US consumer confidence fell to a low of 16 months in June due to fears that high inflation could cause the economy to slow significantly in the second half of the year. read more

“Everything points to growing expectations of an economic slowdown, potentially a recession in the US economy, perhaps as early as this year,” Casanova said.

Renewed concerns about the possibility of a global recession led investors to the safe-haven dollar, with the dollar index holding firm at 104.5.

The euro fell 0.6% against the dollar overnight and was little changed in Asia at $1.0506. The Japanese yen traded at 136.03 per dollar, not far from last week’s 24-year low of 136.7.

The yen has struggled as the Bank of Japan keeps monetary policy loose even as other major banks tighten, a point reiterated by BOJ Governor Haruhiko Kuroda on Wednesday. read more

The yield on the 10-year US Treasury note fell seven basis points to 3.134%.

Oil prices eased slightly after three sessions of gains, but global supply tightness capped losses. An overnight report suggested that Saudi Arabia and the United Arab Emirates may not increase production significantly in the near future. read more

Brent crude futures fell 0.86% on the day to $116.96 a barrel. US crude was down 0.72% at $110.94.

Spot gold was flat, gaining 0.07% to trade at $1,820.7600 an ounce.

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Reporting from Sam Byford in Tokyo; Edited by Simon Cameron-Moore

Our standards: The Thomson Reuters Trust Principles.

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