Asia stocks slide on recession fears; STI up 0.4% as S’pore bank shares rise

TOKYO (REUTERS) – Stocks fell across Asia on Wednesday morning (June 29), extending overnight losses on Wall Street amid concerns over recession, inflation and high oil prices, which also boosted the safe-haven US dollar.

Japan’s Nikkei index fell 1.2 per cent, while Australia’s S&P/ASX 200 slipped 1.1 per cent and South Korea’s Kospi slumped 1.6 per cent.

Asian shares had ended the previous session on a positive trajectory after China announced an easing of its quarantine requirements for inbound passengers, in what some observes saw as the biggest relaxation so far of its zero-Covid-19 strategy.

But the impact was petering out on Wednesday.

“Inevitably, markets tend to overreact to these sorts of news,” said Mr Carlos Casanova, senior economist at Union Bancaire Privee (UBP) in Hong Kong. “For that to be sustainable, we really want to see these measures materialise into actual reopening.”

Chinese blue chips, which hit a four-week high the day before, lost 0.8 per cent while the Hong Kong benchmark fell 1.6 per cent.

The Singapore market bucked the trend as the shares of local banks rose, with the Straits Times Index up 0.4 per cent at the midday trading break. 

Singapore’s biggest lender DBS Bank raised the interest rates on all its home loan packages as of Tuesday night, following similar moves by OCBC Bank and UOB last week. DBS shares were up 0.5 per cent to $30.30 at the break, while OCBC rose 1.2 per cent to $11.60 and UOB added 0.6 per cent to $26.66.

The losses in Asia followed a turbulent day on US markets, with the S&P 500 index down more than 2 per cent after data showed US consumer confidence dropped to a 16-month low in June due to fears that high inflation could cause the economy to slow significantly in the second half of the year.

Renewed worries over the potential for a global recession sent investors to the safe-haven dollar, and the dollar index remained firm at 104.4.

The euro dropped 0.6 per cent on the greenback overnight and was little changed in early Asia at US$1.0529. The Japanese yen stood at 136.03 per dollar, not far last week’s 24-year low of 136.7.

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

The yield on 10-year US Treasury notes was flat at 3.1697 per cent.

Oil prices fell back slightly after three sessions of gains, but global supply tightness underpinned the market. An overnight report suggested that Saudi Arabia and the United Arab Emirates are unable to raise output significantly in the near future.