Most markets fluctuated in Asian trade Tuesday as traders grow increasingly fearful that more big interest rate hikes will tip economies into deep recessions, with the mood also darkened by the worsening Ukraine war and worries over China`s outlook.
With the focus on inflation, analysts said consumer price index data released later this week will be crucial to the direction of risk assets -- another big reading could spark a fresh equity selloff and surge in the dollar.
Investors had hoped that a series of bumper rate increases by the US Federal Reserve this year would begin to drag on the economy and slow runaway prices, allowing policymakers to slow down their pace of monetary tightening.
But a forecast-beating jobs report on Friday highlighted the tough work the central bank has in bringing inflation down from four-decade highs, and many observers warn a recession is virtually inevitable.
World Bank chief David Malpass said there was a "real danger" of a global contraction next year, adding that the surge in the dollar was weakening the developing nations` currencies and pushing their debt to "burdensome" levels.
And JP Morgan boss Jamie Dimon told CNBC that while the US economy was holding up now, it faced several headwinds including rising rates, surging inflation, Fed tightening and the Ukraine war.
He added that he saw a US recession in six to nine months, and that the S&P 500 could fall another 20 percent.
Barings strategist Christopher Smart said: "It`s little wonder investors enter the week in a dreary mood, especially with headlines from Ukraine signalling a further escalation in geopolitical tensions.
"Of course, markets are meant to look ahead, but it`s hard not to see the next few quarters bringing more of the same."
After another round of losses in New York, Asia again struggled.
Tokyo shed more than two percent as traders returned from a long weekend to play catch-up with Monday`s retreat, while Hong Kong was hit again by hefty selling in tech firms, dropping the Hang Seng Index below 17,000 points for the first time since late 2011.
Seoul was off more than two percent, while Taipei tanked as semiconductor firms including TSMC were hammered by new US export controls aimed at restricting China`s ability to buy and make high-end chips with military applications. Jakarta was also down.
Still, bargain-buyers helped push gains in Shanghai, Singapore, Wellington and Manila. Sydney was flat.
There was a glimmer of optimism for investors in comments from Fed vice chair Lael Brainard, who appeared to hint at a more cautious tone for policy as the hikes already announced work through the economy.
But SPI Asset Management`s Stephen Innes said traders were likely to be guarded in their reaction to the remarks.
"With the market in `fool me once, shame on me, fool me twice, shame on you` mode, investors should be 100 percent defensive, erring to classical risk-off strategies as local conversations defer to risk-off," he said in a commentary.
On currency markets, the dollar remained king as the United States lead the monetary tightening drive, and eyes are on the reaction in Tokyo as the yen drops towards the 145.90 level that last month saw massive government intervention.
- Key figures around 0300 GMT -
Tokyo - Nikkei 225: DOWN 2.3 percent at 26,480.97 (break)
Hong Kong - Hang Seng Index: DOWN 1.3 percent at 16,985.14
Shanghai - Composite: UP 0.1 percent at 2,976.98
Pound/dollar: DOWN at $1.1048 from $1.1059 on Monday
Euro/dollar: DOWN at $0.9690 from $0.9708
Euro/pound: DOWN at 87.71 pence from 87.76 pence
Dollar/yen: DOWN at 145.67 yen from 145.72 yen
West Texas Intermediate: DOWN 0.3 percent at $90.84 per barrel
Brent North Sea crude: DOWN 0.2 percent at $96.00 per barrel
New York - Dow: DOWN 0.3 percent at 29,202.88 (close)
London - FTSE 100: DOWN 0.5 percent at 6,959.31 (close)
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