Asian stocks retreat on global recession angst, dollar firm

Asian stocks declined today, extending a global equity slide to a third day, as investors fretted over recession risks amid signs of further aggressive central bank policy tightening.

The dollar and Treasury yields remained elevated after multiple Federal Reserve officials continued to talk up additional rate hikes ahead of a crucial US jobs report later today - while rising crude oil prices compounded concerns about prolonged inflation.

Japan's Nikkei dropped 0.7 percent as of 0130 GMT, pulling back from a two-week high reached yesterday.

South Korea's Kospi slipped 0.33 percent, weighed partly by a decline in Samsung Electronics shares after the technology giant flagged a worse-than-expected 32 percent drop in quarterly operating earnings.

Australia's stock benchmark retreated 0.59 percent.

Hong Kong's Hang Seng was 1.17 percent lower in early trade, with its tech stocks tumbling 2.32 percent. Mainland shares remain closed for the final day of the Golden Week holiday.

MSCI's broadest index of Asia-Pacific shares declined 0.85 percent.

Meanwhile, US E-mini S&P500 futures pointed 0.12 percent lower, after the index dropped one percent overnight.

Fed officials showed no intention of backing down from the most aggressive rate hike campaign in decades.

Fed Governor Lisa Cook, Chicago Fed President Charles Evans and Minneapolis Fed President Neel Kashkari all emphasised that the inflation fight was ongoing and they were not prepared to change course.

Stocks started the week on a strong footing, with the MSCI world equity index rallying 5.65 percent in the first two days amid speculation that the pace of central bank tightening might slow, but that has fizzled out since Wednesday.

Markets currently price an 85.5 percent chance of a 75 basis point increase for next month's Federal Open Market Committee meeting, and 14.5 percent odds for a half-point bump.

Investors will now be looking to today's non-farm payrolls report for some clarity as to whether a steady diet of rate hikes has begun to take a bite out of hiring and wage inflation.

"Ongoing hawkish comments by Fed officials (are) a clear pushback on the 'Fed will pivot' narrative that has supported risk assets since the beginning of the week," said Tapas Strickland, head of market economics at National Australia Bank.

"Some positioning ahead of US payrolls tonight is also probably a factor. Given the rally in risk assets earlier in the week, the pain trade would seem to be a 'good news is bad news' print."

The yield on the benchmark 10-year Treasury note was at 3.8297 percent in Tokyo trading, little changed from its New York close following a two-day rebound from a two-week low of 3.5620 percent.

The dollar index, which tracks the greenback versus a basket of six major peers, was little changed at 112.24 following a 1.84 percent two-day rally from a two-week low.

Major currencies affected

Sterling sagged near its lowest level this week, last changing hands at US$1.1164 (RM5.20), while the euro sank to its lowest since Monday at US$0.9787 (RM4.55).

Japan's yen weakened past 145 again overnight and fluctuated around that level in early today’s trading. Japanese authorities intervened to support their currency for the first time since 1998 on Sept 22 following a break of the 145 level.

Crude oil today continued the climb triggered by OPEC+ output cuts announced this week.

Brent crude futures rose 19 cents to US$94.61 (RM439) a barrel. WTI crude futures rose 24 cents to US$88.69 (RM412) a barrel, after earlier hitting US$89.37 (RM415) per barrel, the highest since Sept 14.

- Reuters