Asian stocks sink on German inflation, British tax cuts

Asian stocks sank again on Friday after German inflation spiked higher, British Prime Minister Liz Truss defended a tax-cut plan that rattled investors and Chinese manufacturing weakened.

Shanghai, Tokyo, Hong Kong and Sydney retreated. Oil prices edged lower.

Wall Street's benchmark S and P 500 index fell 2.1 per cent on Thursday to its lowest level in almost two years after strong US jobs data reinforced expectations the Federal Reserve will stick to plans for more interest rate hikes.

Investors increasingly worry the global economy might tip into recession following interest rate hikes by the Fed and central banks in Europe and Asia to cool inflation that is at multi-decade highs.

Global export demand is weakening and Russia's attack on Ukraine has disrupted oil and gas markets.

Markets slipped on Thursday after Germany reported September inflation accelerated to 10.9 per cent and Chancellor Olaf Scholz said the world's fourth-biggest economy faces a “double whammy” as energy prices surge.

“We'd be inclined to argue that we haven't yet seen the bottom,” said ING economists in a report.

The Shanghai Composite Index lost 0.6 per cent to 3,023.91 after surveys of manufacturers showed production and new orders declined in September.

The Nikkei 225 in Tokyo fell 1.7 per cent to 25,979.75 and the Hang Seng in Hong Kong declined by 0.2 per cent to 17,126.01. The Kospi in Seoul added 0.2 per cent to 2,173.71.

Sydney's S and P ASX 200 sank 0.7 per cent to 6,506.20. New Zealand and Southeast Asian markets declined.

Investors already were uneasy about signs global activity was weakening before Truss's government announced multibillion-dollar tax cuts.

Traders worry that will push up already high inflation, forcing the British central bank to cool economic growth by raising interest rates further.

Stock markets and the value of the British pound rebounded on Wednesday after the Bank of England said it would buy government bonds to support their price. But markets resumed their slide on Thursday after Truss shrugged off criticism and defended her tax-cut plan despite a plea from the International Monetary Fund to reverse course.

On Wall Street, the S and P 500 fell to 3,640.47. More 90 per cent of the stocks in the index declined, putting it on track to end September with an 8 per cent loss for the month.

The Dow Jones Industrial Average fell 1.5 per cent to 29,225.61 and the Nasdaq composite lost 2.8 per cent to 10,737.51.

The S and P 500 is down more than 20 per cent for the year as investors wait for a break in inflation that has prompted the Fed to raise interest rates five times.

The yield on a two-year US Treasury, or the difference between its market price and the payout at maturity, widened to 4.2 per cent from Wednesday's 4.14 per cent.

Stronger than expected US employment data on Thursday reinforced expectations the Fed will feel comfortable sticking to plans to raise interest rates further and keep them elevated through next year.

Fewer workers filed for unemployment benefits last week than forecast.

In China, surveys of manufacturers by business news magazine Caixin found production and news orders declined. That was in line with expectations that a Chinese manufacturing boom would fade due to weak global demand.

The Caixin monthly purchasing managers' index declined from its August level while a separate index by the China Federation of Logistics and Purchasing edged above a break-even point that shows activity increasing.

“The downturn in external demand looks set to deepen,” said Zichun Huang of Capital Economics in a report.

In energy markets, benchmark US crude lost 9 cents to USD 81.14 per barrel in electronic trading on the New York mercantile Exchange.

The contract fell 92 cents on Thursday to USD 81.23. Brent crude, used to price international oils, shed 10 cents to USD 87.08 per barrel in London. It lost 83 cents the previous session to USD 88.49.

The dollar rose to 144.70 yen from Thursday's 144.43 yen. The euro rose to 98.05 cents from 97.90 cents.

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)