Asian stocks sank again Wednesday while the dollar held gains against the yen and sterling as the volatility that has characterised markets for most of the year showed no sign of letting up.
Angst-ridden investors are struggling to find some solace as they navigate a range of crises that threaten the global economy, from soaring prices and bumper interest rate hikes to the Ukraine war and China's Covid-induced growth slowdown.
The gloom was summed up by the International Monetary Fund, which on Tuesday highlighted the risks of inflation and the conflict in Europe as it slashed its global growth forecast and warned: "For many people 2023 will feel like a recession".
Later, US President Joe Biden admitted there was a chance the country could suffer a "slight" recession.
The latest blow came Tuesday when the Bank of England announced it would stop its emergency bond-buying efforts on Friday, ignoring calls to extend the programme to allow markets to stabilise.
Officials were forced last month to step into financial markets to prevent a collapse in pension funds caused by a spike in bond prices after a debt- fuelled, tax-cutting mini budget by new finance minister Kwasi Kwarteng sparked fears of a surge in borrowing.
The move quelled the crisis -- after the pound hit a record-low $1.0350 -- but traders were spooked by the prospect of more selling when the BoE removes its support.
Sterling, which had recovered to as high as $1.15 last week, came back under pressure to drop back below $1.10 Tuesday where it remained the next day in Asian business.
Risk assets buckled after the announcement, with all three main indexes on Wall Street turning lower Tuesday, having been in positive territory earlier.
- Fresh volatility warning -
Most of Asia followed suit.
Hong Kong led losses, shedding more than two percent, while Tokyo, Sydney,
Shanghai, Singapore, Seoul, Wellington, Jakarta and Taipei were also down.
"And at least they did not allow the rug to get ripped from under pension
funds," said SPI Asset Management's Stephen Innes. "But stepping away as the
buyer of last resort is not great for risk or sterling.
"At the end of the day, UK economic issues, fiscal irresponsibility, and a
hawkish Fed will linger. So do not be surprised by a pickup in pound
volatility and for a continued move lower as well."
