Asian shares extended losses on Wednesday and bonds were sold off as weak factory data from China revived worries about global economic growth amid fears of faster rate rises in the United States.
MSCI’s broadest index of Asia-Pacific shares outside Japan slipped 0.7 per cent, on track for a second straight day of losses.
It is down more than 4.5 per cent in February after global equity markets were mauled at the start of the month by worries US inflation is picking up.
Japan’s Nikkei stumbled 0.4 per cent on a slightly firmer yen, while S&P futures slipped 0.3 per cent.
China’s blue-chip CSI300 skidded 0.8 per cent while Shanghai’s SSE Composite and Hong Kong’s Hang Seng index each declined more than 1 per cent.
Asian markets had opened mildly lower but selling intensified after data showed growth in China’s manufacturing sector in February slowed more than expected to the weakest in over 1-1/2 years as the Lunar New Year holidays disrupted business activity and tougher pollution rules curtailed factory output.
Growth in China’s services industry also slowed, suggesting the key sector was starting to display signs of fatigue. The services sector accounts for over half of China’s economy.
However, analysts cautioned the timing of the long holiday may have skewed the activity readings, and a clearer picture of conditions in China may not emerge for another month.
Sentiment was already sour after Fed’s Jerome Powell gave an upbeat view of the US economy on Tuesday and said recent data had strengthened his confidence on inflation.
When asked about likely catalysts for more than three rate hikes in 2018, he said each member would write a new “dot plot” rate path ahead of the March meeting and that he wouldn’t want to prejudge that outcome.
Rate futures fell following Powell’s remarks as traders began pricing in about a one-in-three chance of a fourth hike this year, reports Reuters.
Fears of faster US rate hikes have caused anxiety that other central banks will start to tighten policy and raise borrowing costs. That would in turn hurt corporate earnings, clouding the outlook for what had been expected to be another solid year of global economic growth.