Asian shares fell on Monday, retreating from more than three-week highs, as fears of a global economic downturn dampened investor risk appetite.
Bond yields retreated on bets that a US recession will slow the Federal Reserve’s aggressive tightening, with markets looking for policy clues from a two-day meeting of the Federal Open Market Committee that begins on Tuesday.
Meanwhile, the greenback rebounded from 2.5-week lows against its major counterparts on the back of safe-haven demand for the greenback.
“Risk markets have priced in some slowdown, but have they priced in an outright recession? I don’t think so,” said Ray Attrill, head of the currency strategy at National Australia Bank.
Japan’s Nikkei lost 0.75%, and China’s blue-chip shares lost 0.13%. Hong Kong’s Hang Seng lost 0.45%, and the technology index fell 1.51%.
MSCI’s broadest index of Asia-Pacific shares fell 0.62% to 158.68 after hitting 160.03 on Friday, its highest since June 29.
US S&P 500 Emini futures fell 0.09%, indicating the benchmark extended its 0.93% loss on Friday when a survey showed business activity contracted for the first time in nearly two years amid persistently rising inflation and rapidly rising interest rates.
Earlier in the day, data also showed an unexpected contraction in euro zone business activity.
The US dollar index, which measures the greenback’s safe-haven asset against six major currencies, edged up 0.1% to 106.81 from a 2.5-week low of 106.10 hit on Friday.
The dollar was up 0.29% at 136.485 yen, while the euro was down 0.24% at $1.01875.
The 10-year US Treasury yield was little changed at 2.79% after hitting a high of 3.083% in the previous two sessions.
Equivalent Japanese government bond yields fell to 0.19%, their lowest since March 14, and Australian yields fell to 3.285% on May 31.
The Fed ended its two-day meeting on Wednesday, with markets pricing in a 75bps rate hike, with a 9% chance of a one percentage point hike.
In commodities, Brent crude rose 0.15%, or 15 cents, to $103.35 a barrel. Nymex light crude was slightly higher at $94.75. Gold was down 0.14% at $1,724.05 an ounce.