Asian markets track Wall St rout, oil sinks

China’s main sharemarkets dropped more than 5 per cent, as economic worries grow across the region.

Oil markets were also sharply lower as China continues to struggle to get a grip on a Covid outbreak. Picture: AFP.

Shares in Hong Kong and mainland China plunged on Monday on growing economic fears, as a fast-spreading Covid outbreak forces lockdowns in major cities, while traders were also worried about an expected sharp hike in US interest rates.

The Shanghai Composite Index closed down 5.1 per cent, while the Shenzhen Composite Index on China’s second exchange plunged 6.48 per cent.

Hong Kong’s Hang Seng Index was down 3.7 per cent in late trade.

Meanwhile, Japan’s benchmark Nikkei 225 Index closed down 1.9 per cent.

Australian trading was closed for the ANZAC Day holiday.

Asian markets also suffered from growing concerns of a sharp hike in US interest rates as officials struggle to contain runaway inflation, while oil was hit by expectations Chinese demand will dry up owing to Covid lockdowns.

The losses extended a sell-off across the world last week fuelled by comments from Federal Reserve boss Jerome Powell indicating officials will hike borrowing costs by half a point next month and possibly several times more by year’s end.

All three main indexes on Wall Street ended more than 2 per cent down Friday, and Asia followed suit with hefty losses.

Investors have been fleeing risk assets as they become worried that the tightening — to fight inflation at more than 40-year highs — will knock the pandemic economic recovery off course and dent companies’ bottom line.

With earnings season under way, a close eye is being kept on what firms say about the impact on and the outlook for business in light of inflation, forecast rate hikes, supply chain snarls and the Ukraine war.

“There has been little to avert the investor pessimism as inflation and interest rate expectations start to bite,” Geir Lode, at Federated Hermes, said.

“In particular due to the uncertainty of the macro environment, expectations are low with regard to forward estimates and guidance, building on lowered expectations from the previous quarter.”

Oil markets were also sharply lower as China continues to struggle to get a grip on a Covid outbreak that has forced Shanghai — the country’s biggest city — into lockdown and dealing a blow to demand.

Officials in the finance hub reported 39 deaths Sunday, its highest daily toll despite weeks of strict containment measures, while Beijing warned of a “grim” situation as infections rise.

WTI fell below $US100 a barrel, even as the war in Ukraine hits supplies of the black gold owing to embargoes on Russian exports.

“Oil is rerating lower due to the China consumption hit while the Federal Reserve is raising interest rates to slow down the US economy,” said Stephen Innes at SP Asset Management.

“Those are two gusty headwinds suggesting some oil bulls will give way to recession fears and demand devastation.” The lockdowns in China are adding to the inflation surge as they continue to hit supply chains.

On currency markets, the euro was unable to hold a brief rally that came on the back of Emmanuel Macron’s victory in France’s presidential election, seeing off far-right challenger Marine Le Pen.

AFP

Originally published as Asian markets track Wall St rout, oil sinks