After sinking on Friday and Monday, New York’s three main indexes suffered another disappointing day Tuesday with the S&P 500 down for a fifth straight day and the Dow the best performer after ending barely changed.
The losses continued in Asia with Tokyo, Sydney, Seoul, Taipei and Jakarta all in the red.
Traders are now steeling themselves for the release next week of crucial inflation figures and the Fed’s final policy meeting of the year, which will be pored over for an idea about its intentions for 2023.
Good news, bad news
“The good news is that the market sees more than a reasonable chance of the Fed reversing gears next year, mainly in response to a downturn,” said Stephen Innes at SPI Asset Management.
“But the bad news is we are likely to fall into recession thanks in no small part to the lagged impact of the most aggressive Fed tightening campaign since (former Fed boss) Paul Volcker” in the 1980s.
The fear of a US recession is playing off against China’s shift away from its zero-Covid strategy of lockdowns and mass testing that has been blamed for clattering the world’s number two economy.
After widespread protests last month against the strict measures and calls for more political freedoms, authorities have scaled back many of them and on Wednesday announced a nationwide loosening of restrictions.
While there are worries that the more liberal approach will spark a surge in infections, it has helped fan a rally across markets, particularly in Hong Kong where Chinese tech firms and property developers are listed.
The Hang Seng Index has soared more than 30 per cent since the end of October, and while it stumbled Wednesday it rose more than two per cent Thursday.
There were also gains in Shanghai, Singapore and Wellington.
On oil markets, both main contracts bounced after suffering selling over the past four days as demand concerns caused by a possible recession offset China’s reopening.
A jump in US petrol stockpiles added to the downbeat mood among traders, with WTI sitting at its lowest levels of the year and Brent at its weakest since January.
Editor: Callie
Proofreading:AUREL