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Title: Inflation, recession worries drag down Asian shares; oil skids

Jun 02, 2022 02:01AM ET

By: AnalysisWatch

Asian stock markets fell on Thursday due to widespread investor concerns over high inflation and the threat of recession, while oil prices fell following news of reassurance from Saudi Arabia on production.

Brent crude, the global benchmark, fell about 2 per cent to $114.02 a barrel ahead of a meeting of oil-producing countries that is expected to pave the way for a production increase.

US crude oil also fell about 2% to $112.97.

The drop in oil prices accelerated after the Financial Times reported that Saudi Arabia may be ready to increase oil production in case of a sharp drop in Russian output.

The broader MSCI index of Asia-Pacific shares outside Japan fell 1.4 per cent in afternoon trading. China's blue-chip index fell 0.1 percent, Australian stocks lost 1 percent and Seoul's KOSPI fell 1.1 percent.

In Tokyo, the Nikkei slipped 0.25 per cent.

Investor concerns over inflation and recession intensified amid uncertainty over the pace of interest rate hikes by the US Federal Reserve, the impact of the Russia-Ukraine war on food and commodity prices, and supply chain constraints exacerbated by China's tight COVID-19 restrictions.

On Wednesday, a survey showing stronger-than-expected US manufacturing activity in May did little to ease these concerns. Jamie Dimon, chairman and CEO of JPMorgan Chase & Co, likened the challenges facing the US economy to a "hurricane".

A new survey of factory activity in South Korea showed Thursday a slowdown in growth in May, with a contraction in import and export orders, the latest indicator of global manufacturing woes.

Although stronger US manufacturing data did little to boost US equities overnight, it supported the dollar as yields hit two-week highs.

In Asian trade, the global dollar index held steady at 102.56, while the yen strengthened slightly to 130.04 against the dollar as US yields fell. The euro rose slightly by 0.05% to $1.0651.

The benchmark 10-year US Treasury bond yielded 2.9076%, down from Wednesday's close of 2.931%, while the two-year yield fell to 2.6540% from a close of 2.664%.

The lower yields kept gold prices steady after Wednesday's two-week low. Spot gold rose as low as $1,846.46 an ounce.

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