Asian shares fall on inflation, recession concerns; oil skids

Asian share markets fell on Thursday on widespread investor worries over high inflation and the threat of recession, while oil prices slumped following a report of reassurances from Saudi Arabia over production.

Global benchmark Brent crude was last down more than 2% a barrel at $113.86 ahead of a meeting of oil producing countries later in the day, which is expected to pave the way for output increases.

U.S. crude also dipped more than 2% to $112.55 per barrel.

The fall in oil prices gathered pace after the Financial Times reported that Saudi Arabia may be prepared to raise oil production in the event of a sharp drop in Russia’s output.

“This will be well received by Western leaders given inflation – and inflation expectations – remain eye wateringly high, and central banks try to raise rates at the risk of tipping their economies into a recession,” said Matt Simpson, senior market analyst at City Index in Sydney.

“More supply essentially soothes some of those inflationary fears, even if there is a lot more work to do when it comes to fighting inflation.”

Investors’ worries over inflation and recession have festered amid uncertainty caused by the U.S. Federal Reserve’s pace of interest rate hikes, the impact of the Russia-Ukraine war on food and commodity prices, and supply chain constraints exacerbated by strict COVID-19 curbs in China.

On Wednesday, a survey showing stronger-than-expected U.S. manufacturing activity in May did little to assuage those concerns. Jamie Dimon, chairman and chief executive of JPMorgan Chase & Co, likened the challenges facing the U.S. economy to a “hurricane”.

Rodrigo Catril, senior FX strategist at NAB, said details of the survey showed price signals “still consistent with extremely strong inflationary pressures” and negative employment growth in the manufacturing sector.

“The services sector is the big U.S. employer so it will be important to see what the Services ISM reveals on Friday,” he said.

A new survey of South Korean factory activity on Thursday showed slowing growth in May as import and export orders shrank, the latest indicator of global manufacturing woes.

In morning trade, MSCI‘s broadest index of Asia-Pacific shares outside Japan was down 1%. China’s blue-chip index fell 0.45%, Australian shares were down 0.90%, and Seoul’s KOSPI was about 1% lower.

In Tokyo, the Nikkei slid 0.26%.

The Asian moves tracked weakness on Wall Street overnight, where the Dow Jones Industrial Average fell 0.54%, the S&P 500 lost 0.75% and the Nasdaq Composite dropped 0.72%.

While the stronger U.S. manufacturing data did little to lift U.S. shares, it supported the dollar.

In Asian trade, the global dollar index was steady at 102.56, while the yen firmed slightly to 130.05 per dollar as U.S. yields inched lower from to week highs, and the euro edged up 0.05% to $1.0651.

Benchmark U.S. 10-year Treasury notes last yielded 2.9149%, down from a U.S. close of 2.931% on Wednesday, while the two-year yield slipped to 2.6517% from a close of 2.664%.

The lower yields kept gold prices steady after hitting a two-week low on Wednesday. Spot gold was little changed at $1,845.08 per ounc

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