Growth concerns stall global stocks rally

Singapore — Asia’s stock markets wobbled lower on Wednesday as reality bit on hopes for a soft economic landing in the US, and investors curbed their enthusiasm about China’s reopening.

The S&P 500 had dropped for a fourth straight session overnight and the brakes have come on a rally that has lasted almost two months. Oil also fell sharply and, with Brent futures at $79.50 a barrel, is back where it began the year.

MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.4% and Japan’s Nikkei fell 0.5%.

“Some of the optimism that had driven the rally is being put to the test,” said Shane Oliver, head of investment strategy at Australia’s AMP.

“We might be transitioning from a situation of worrying about inflation and interest rates, to one where the negatives become weakening growth and falling profits.”

Facebook parent Meta also dragged down markets, with shares sliding 6.8%, after reports that EU regulators have ruled the company will need to ask users before running advertising based on their personal data.

‘Economic growth is slowing’

In the US, big banks are bracing for a worsening economy in 2023 as inflation and rate rises threaten consumer demand, with top executives at Goldman Sachs, JPMorgan and Bank of America all sounding downbeat in remarks on Tuesday.

“Economic growth is slowing,” said Goldman Sachs CEO David Solomon. “When I talk to our clients, they sound extremely cautious.”

The growth fears rallied longer-dated bonds and helped the safe-haven US dollar to pause its recent retreat.

The yield on benchmark 10-year US treasuries fell 8.6 basis points (bps) to 3.513% overnight and was last at 3.5442%. That is more than 80 bps below the two-year yield as investors anticipate high rates hurting growth.

Traders in Asia are intently weighing prospects for loosening in China’s Covid-19 controls and what that means for the world’s second-biggest economy and regional demand.

Beijing on Tuesday allowed residents into parks, supermarkets, offices and airports without tests.