Asian stock markets sink on fears of slowing global growth

Fears about slowing global economic growth have spread to Asian markets.

Japan’s Nikkei dove more than 3%, while Hong Kong’s Hang Seng was down more than 1.5% in afternoon trading Monday.

It’s the first day of trading in the region since Friday’s sell-off in the United States when investors dumped stocks in response to disappointing manufacturing data from Germany and a warning signal that a US recession could be on the horizon.

“I think the Asian markets are taking their cue from the US,” said Kerry Craig, global market strategist at JP Morgan Asset Management.

“Given just how strong equities have rallied this year it is not surprising that investors were already questioning how much further they could go,” he added.

US stocks on Friday suffered their worst day since early January after the yield on 3-month Treasuries rose above the rate on 10-year Treasuries for the first time since 2007. A flattening yield curve, or the difference between short- and long-term rates, is typically seen as a sign that long-term economic confidence is dwindling.

An inverted curve has been a reliable predictor of a coming US recession for decades. But market experts advised investors against panicking for the time being.

Strategists at the Commonwealth Bank of Australia said that while the inverted yield curve is “an ominous sign,” they aren’t predicting a US recession anytime soon.

Craig said he interprets the US bond market move as a sign of slowing economic growth around the world.

“This means that we don’t expect the market to collapse, but neither do we expect equity returns to be that inspiring from here,” he added.

After a brutal December — the Dow’s worst since the Great Depression — many stock markets around the world have rebounded as investors have become more optimistic about the health of major economies and the prospect of an end to the damaging trade war between the United States and China.

Chinese shares, which had a terrible 2018, have performed particularly well. The benchmark Shanghai Composite, which had gained about 25% since the start of the year, was about 1% lower on Monday afternoon.

Analysts said that the outcome of trade talks between the United States and China is more significant for stocks in Asia than the shift in the US bond market.

“A couple of basis points inversion between 3-month and 10-year yields does not an impending economic Armageddon make,” Jeffrey Halley, a Singapore-based analyst at online trading platform Oanda, said in a commentary.

“A deal or no-deal” over trade between Washington and Beijing “remains the only real game in town,” he added.

Negotiations between the two governments aimed at resolving the trade war will resume this week.

Top US officials are due to hold talks with their Chinese counterparts in Beijing starting Thursday. A Chinese delegation is scheduled to go to Washington for further talks in early April.

Negotiations had been on hold as the two sides tried to figure out how to overcome disagreements about how the United States would ensure China is abiding by any deal. US concerns about how China goes about getting hold of American technology and trade secrets have also been a sticking point.