Asian shares have tumbled to their lowest in nearly two years as investors shed riskier assets on worries about higher interest rates and their impact on economic growth, while the US dollar held near 20-year highs.
MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.8 per cent on Tuesday, falling for a seventh straight session and extending declines to 17 per cent this year.
Across Asia, share indices were a sea of red. The Nikkei lost 0.9 per cent, Australian shares shed 2.5 per cent and Korean stocks lost two per cent.
S&P 500 stock futures and Dow Jones futures both fell 0.5 per cent and Nasdaq futures were down 0.6 per cent.
“The idea of a benign and gentle tightening cycle has evaporated,” ANZ analysts said in a report.
“The reality is that the Fed cannot control the supply side of the economy in the short-run, so as long as key indicators like the labour force participation rate stay low and Chinese exports slow, the risk to inflation, and therefore interest rates, lies to the upside,” ANZ said.
Central banks in the United States, Britain and Australia raised interest rates last week and investors girded for more tightening as policymakers fight soaring inflation.
Overnight, US stocks extended Friday’s bruising sell-off as investors rushed to protect themselves against the prospect of a weakening economy.
Oil prices ticked lower on Tuesday on demand worries as coronavirus lockdowns in China, the top oil importer, continued. Brent crude slipped 0.5 per cent to $US105.4 a barrel after falling 5.7 per cent on Monday.