Asian shares plunge on US recession fears

Asian share markets fell and bond prices rose on Monday amid concerns about a potential US recession.

Investors fled from risky assets and bet on the need for quick interest rate cuts to support economic growth.

The yen and Swiss franc, considered safe-haven currencies, strengthened as carry trades unwound.

The selling pressure was so intense that circuit breakers were activated in some Asian exchanges.

The Nasdaq futures plummeted by 2.9 per cent, and S&P 500 futures dropped by 1.6 per cent.

In Asia, Japan’s Nikkei index suffered an eye-watering 8.0 per cent decline, marking its steepest three-day loss since the 2011 financial crisis.

MSCI’s broadest index of Asia-Pacific shares outside Japan lost 2.8 per cent. Chinese blue-chip stocks gained 0.2 per cent, supported by a rebound in the Caixin services PMI to 52.1.

Japanese 10-year bond yields plunged by 17 basis points to 0.785 per cent, the lowest level since April, as markets reassessed the likelihood of a Bank of Japan (BOJ) rate hike.

Meanwhile, Treasury bond yields also declined, with 10-year yields reaching 3.723 per cent, the lowest since mid-2023.

Two-year yields fell to 3.818 per cent, dropping by 50 basis points last week. There is a possibility that two-year yields could soon dip below 10-year yields, potentially signalling a positive curve inversion that has historically preceded recessions.

The US dollar weakened significantly against major currencies, including a 2.2 per cent decline against the Japanese yen. The Swiss franc gained one per cent as investors sought safety.

Gold prices rose to $2,456 an ounce as a safe-haven asset, while oil prices edged up amid geopolitical tensions but remained under pressure from demand concerns.

Attribution: Reuters