Financial markets, already anxious about the prospects for aggressive US interest rate hikes, a spike in global inflation and the Ukraine war, were rattled this week over slowdown fears in China as Beijing stuck firm to stringent COVID-19 lockdowns.

News of Russia cutting gas supplies to Eastern Europe added to the sombre mood, sending the MSCI world equity index slumping to a 13-month low.

There was little let-up in the selling in Asia, with MSCI's broadest index of Asia-Pacific shares outside Japan down 1.1 percent to its lowest level since March 15. Tokyo’s Nikkei and Seoul's KOSPI index were also down sharply by 1.8 percent and 1.19 percent respectively.

Chinese blue chips were flat after falling to their lowest in two years on Tuesday and the Hong Kong benchmark fell 0.72 percent. Australian shares were also down 0.73 percent.

The catalysts for the latest declines "were yet more bellicose words from Russia over Ukraine, and the announcement that Bulgaria and Poland would see their gas supplies from Russia shut off from today," ING said in a note.

Prospects

Every Monday

With exclusive interviews and in-depth coverage of the region's most pressing business issues, "Prospects" is the go-to source for staying ahead of the curve in Indonesia's rapidly evolving business landscape.

View More Newsletter

By registering, you agree with The Jakarta Post's Privacy Policy

Sign Up

Thank You

for signing up our newsletter!

Please check your email for your newsletter subscription.

View More Newsletter

Russia, which has been demanding payments for its gas in roubles as sanctions over its invasion of Ukraine bite, said it will halt supplies to Poland and Bulgaria from Wednesday.

The move, viewed as a major escalation, sent oil and gas prices higher. Brent crude futures rose $1.11, or 1.1 percent, to $106.10 a barrel by 0019 GMT. US West Texas Intermediate crude futures rose 84 cents, or 0.8 percent, to $102.54 a barrel.

China's central bank said this week it would support its economy as worries grew that Beijing's insistence on continuing with a "zero-COVID" policy would harm domestic and global growth while further intensifying supply snags.

The dollar, which hit a two-year high this week, rallied further against a basket of rival currencies to 102.34, as did gold, which edged higher to settle at $1,903 an ounce.

Safety flows have also supported the yen, which lifted away from recent lows to a one-week high of 126.96 and overnight enjoyed its best day on the struggling British pound in more than two years.

Analysts say markets worry that an expected streak of rate increases by the Federal Reserve could hurt growth just when many economies have started to recover from the pandemic-driven slumps.

Investors have also been fretting about volatile commodity prices in the wake of the Ukraine war, with the International Monetary Fund warning this week about stagflationary risks in Asia.

The overnight sell-off on Wall Street underlined investor anxiety about the hit to earnings, with the Nasdaq down 4 percent, its lowest since late 2020. After market close, Google’s parent Alphabet Inc reported its first quarterly revenue miss of the pandemic and was down about 3 percent. Microsoft Corp fell 4 percent ahead of its results but recovered once it forecast double-digit revenue growth next year.

Nasdaq futures were down 0.28 percent.

"I think with where the market is right now, in this indiscriminate selling and fear phase, I think you've got more potential for downside risk than you have for an upside surprise," said Ross Mayfield, an investment strategist at Baird in Louisville, Kentucky, US.

US treasury yields also slipped on safety-bid, with the yield on benchmark 10-year Treasury notes down 5.5 basis points to 2.772 percent, while yields on three-month bills to 30-year bonds were all lower on the day.

Popular

Indonesian islanders lose ground as islets put on sale

Labubu dolls ride China soft-power wave

A democratic reckoning for global development finance