On the first day of April 2022, Asian stock markets slipped for a second session, as the shadow of war in Ukraine and the fear of a coming economic slowdown dampened a brief recovery. Oil, which had surged after Russia's invasion, was falling sharply as nations released reserves to calm prices, yet cheaper energy did not bring relief to investors. What they feared was that persistent inflation would force central banks into aggressive rate increases, and that the cost of taming prices might be a recession. The moment reflects a familiar human pattern: the relief that follows a crisis's peak is
Asian Shares Slip as Recession Fears Build and Oil Slides on Reserve Releases
Cheaper crude did not settle investors.
Mark
Oil is falling sharply, which sounds like good news. Why are stocks still slipping?
Mimi
Because cheaper oil doesn't remove the worry about inflation. Investors still fear central banks will have to hike rates hard, and that could cause recessions.
Mark
What's the bond market saying?
Mimi
The gap between U.S. two-year and 10-year yields is nearly zero, 2.3733% against 2.3785%. An inversion there is read as a recession signal.
Luke
Worth being careful, though. The source calls it a reliable signal that a recession may follow in one to two years. That's a lag and a probability, not a forecast for this year. And the curve is nearly flat, not confirmed inverted in this report.
Mark
And the Fed's path?
Mimi
Analyst Jeffrey Halley said the Fed may engage in a series of 0.5% hikes.
Luke
That's one analyst's view, with a hedge in it. The report doesn't say the Fed has committed to anything.
Mark
What about the Russian gas threat?
Mimi
Putin threatened to halt contracts supplying a third of Europe's gas unless paid in roubles, and Germany activated an emergency plan that could lead to rationing.
Luke
Note the word could. Rationing isn't announced, and the report doesn't say any supply has actually stopped.
El Pulso
- Asian shares fell for a second straight session as the Nikkei and regional indexes lost ground and headed for a weekly decline.
- Oil dropped toward its steepest weekly fall in nearly two years after large US strategic reserve releases, with US crude slipping below $100 a barrel.
- Russia's threat to demand roubles for gas to Europe pushed Germany to activate an emergency plan that could mean rationing.
- Markets are bracing for aggressive Federal Reserve rate hikes, while the near-inversion of the US yield curve hints at recession within one to two years.
- Investors are racing toward the March US jobs data, looking for wage inflation signals that could decide how hard central banks will tighten.
On the first day of April 2022, Asian stock markets slipped for a second session, as the shadow of war in Ukraine and the fear of a coming economic slowdown dampened a brief recovery. Oil, which had surged after Russia's invasion, was falling sharply as nations released reserves to calm prices, yet cheaper energy did not bring relief to investors. What they feared was that persistent inflation would force central banks into aggressive rate increases, and that the cost of taming prices might be a recession. The moment reflects a familiar human pattern: the relief that follows a crisis's peak is often undercut by the knowledge that its consequences have only begun to unfold.
Asian shares slipped for a second straight day on Friday, April 1, 2022, as worries about the war in Ukraine and a possible recession wiped out a recent rally. In Tokyo the Nikkei fell 0.4% and was heading for a weekly loss of 1.5%, while the broader Asia-Pacific index outside Japan dropped 0.6%. Oil was the main story. Prices kept falling after the United States announced large releases from its strategic reserves, and US crude dipped below $100 a barrel. The commodity was on course for a 13% weekly decline, its steepest in almost two years, though it had earlier jumped more than 30% on the back of the conflict.
Lower energy costs did not bring comfort. Investors feared that inflation would push central banks into sharp interest rate increases, and that those increases could tip economies into recession. One market analyst warned that the Federal Reserve might deliver a series of half-point hikes, reshaping the investment landscape.
The geopolitical situation grew tenser. Russian President Vladimir Putin threatened to halt gas contracts supplying Europe unless they were paid in roubles, and Germany, the country most dependent on Russian gas, called it blackmail and activated an emergency plan that could lead to rationing. Asian economic data added to the unease, with Japanese business confidence at a nine-month low and China's factory activity contracting at its fastest pace in two years.
The first quarter had been painful. Global shares, along with those in the United States and Europe, suffered their worst quarterly drop since the pandemic began in 2020, though the S&P 500 had recovered much of its losses before the quarter closed. In the bond market, the gap between two-year and ten-year US yields had nearly vanished, a pattern that has historically preceded recessions. With the dollar firm, gold steady, and the jobs report due later in the day, investors were watching closely to see how far the central banks would go.
Asian shares fell for a second straight session on Friday, April 1, 2022. Worries over the war in Ukraine and the risk of recession cut short a recent rally, even as oil headed for its steepest weekly decline in almost two years. In Tokyo the Nikkei slipped 0.4% and was set for a 1.5% loss on the week. MSCI's broadest index of Asia-Pacific shares outside Japan was down 0.6%. S&P 500 futures and European futures were both up 0.2%.
Oil was the main moving part. Prices kept sliding after Thursday's announcement of large releases from U.S. strategic reserves, and ahead of a Friday meeting of oil-consuming nations to discuss reserve releases of their own. U.S. crude futures dipped under $100 to $98.93 a barrel, and Brent fell 1% to $103.49. Oil was on course for a 13% weekly drop, the sharpest in almost two years. That follows an earlier surge, driven largely by the Ukraine conflict, that had lifted prices by more than 30%.
Cheaper crude did not settle investors. They were still worried that inflation would push central banks into aggressive rate increases, which could in turn tip economies into recession. Jeffrey Halley, senior analyst at brokerage OANDA, said the invasion re-energised commodity prices and pushed into the future the declines in inflation that had been expected as base effects kicked in. He added that the Federal Reserve may deliver a series of 0.5% rate hikes that would change the investing landscape profoundly, and that other countries could be forced into vigorous catch-up on monetary policy.
The geopolitical backdrop sharpened on Thursday. Russian President Vladimir Putin hit back at Western sanctions by threatening to halt contracts that supply Europe with a third of its gas unless they are paid in roubles. Germany, the country most reliant on Russian gas, accused him of "blackmail" and activated an emergency plan that could lead to rationing.
Economic data from Asia added to the unease. Supply disruption and surging raw material costs pushed Japanese business confidence to a nine-month low last quarter. China's factory activity slumped in March at its fastest pace in two years, and activity has also slowed in South Korea, Taiwan, Vietnam and Malaysia. Hong Kong's Hang Seng dipped 0.8% and Seoul's Kospi lost about 0.6%. Chinese blue-chips reversed a lower open to gain 0.7%, helped by hopes of policy easing.
The quarter that ended March 31 was a rough one. MSCI's global share index, along with U.S. and European shares, posted its biggest quarterly drop since the pandemic outbreak in 2020. The U.S. figure hides a late comeback: the S&P 500 rallied from a near-13% decline to finish the quarter down about 5%.
The bond market, meanwhile, was bracing for slower growth. The gap between U.S. two-year and 10-year yields was nearly zero, with the 10-year at 2.3785% and the two-year at 2.3733%. An inversion of that part of the yield curve is seen as a reliable signal that a recession may follow in one to two years.
The dollar stayed firm on safe-haven flows and expectations of higher U.S. rates. It was up 0.2% against a basket of peers at 98.496 and up 0.55% against the yen at 122.28. The euro eased to $1.1055. Gold was steady at $1,937.05 an ounce after its biggest quarterly gain in two years. Later Friday, investors were due to see U.S. March jobs data, watching wage inflation as closely as the headline number.
Citas Notables
The Ukraine invasion re-energised the commodity price complex, pushing into the future the previously anticipated falls in inflation.— Jeffrey Halley, senior analyst, OANDA
Germany accused Putin of "blackmail" over his demand that gas contracts be paid in roubles.— German government, as reported
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