Hong Kong/New York - Asian shares tumbled on Tuesday pursuing a tumbled bear market in Wall Street on Monday as bond yields struck a two-decade high on fears aggressive U.S. interest rate hikes would push the world's largest economy into recession.
The negative tone in Asia follows a bleak session in the U.S on Monday, which saw Goldman Sachs forecast a 75 basis point interest rate hike at the Federal Reserve's next policy meeting on Wednesday.
Some economists are speculating the Fed on Wednesday may raise its key rate by three-quarters of a percentage point. That’s triple the usual amount and something the Fed hasn’t done since 1994.
No one thinks the Fed will stop there, with markets bracing for a continued series of bigger-than-usual hikes. Those would come on top of some discouraging signals about the economy and corporate profits, including a record-low preliminary reading on consumer sentiment soured by high gasoline prices.
The economy is still holding up overall, but the danger is that the job market and other factors are so hot that they will feed into higher inflation.
"Higher inflation, slower growth and higher interest rates are a damaging combination for financial assets," ANZ strategists wrote on Tuesday.
The dollar dropped 0.06% against the yen to 134.32 but remains close to its more-than-two-decade high of 135.17 reached on Monday.
The European single currency was flat at $1.0407, having lost 3.04% in a month, while the dollar index , which tracks the greenback against a basket of major currencies, was up at 105.19.
U.S. crude dipped 0.06% to $122.14 a barrel. Brent crude was down 0.13% 122.14 per barrel.
Gold was slightly lower with the spot price at $1,818.7395 per ounce.
The coronavirus crash in early 2020 was Wall Street’s last bear market, and it was an unusually short one that lasted only about a month.
With soaring price tags souring sentiment for shoppers, even higher-income ones, Wilson said in a report that “the next shoe to drop is a discounting cycle” as companies try to clear out built-up inventories.
Such moves would cut into their profitability, and a stock’s price moves up and down largely on two things: how much cash a company generates and how much an investor will pay for it.
-AP/Reuters