Global recession fears hit stocks and bonds rally

On Wednesday Asian shares fell and bonds rallied as investor sentiment soured over growing worries about world growth with the U.S.-China trade tensions showing no signs of easing. MSCI’s broadest index of Asia-Pacific shares outside Japan tumbled 0.5% after three straight days of gains. Chinese shares started on the back foot but bounced off early losses to be marginally higher. Australian shares were down 0.7% while Japan’s Nikkei lost 1.2%.

In an indication U.S. markets will fall again on Wednesday, E-Minis for the S&P 500 slipped 0.3%. In early European trading, the pan-region Euro Stoxx 50 futures and German DAX futures were 0.7% lower, while those for London’s FTSE and France’s CAC 40 eased 0.6% each.

Risk aversion has increased globally during recent days as fears of world recession resurfaced amid disappointing macro data in major economies. It happened on the background of wins for eurosceptic parties in EU elections and political turmoil in Austria. Italy’s dispute with the European Commission over its budget is also a major overhang for world markets. In Asia focus remains on the ongoing U.S.-China trade war. On Monday the U.S. President Donald Trump said Washington was not prepared to make a deal with China yet. In response, Chinese newspapers warned today Beijing is ready to strike back at the United States. Though the U.S. policy of tariff skirmish was not limited to China. Trump has also pressed Japan to reduce its trade imbalance between the two countries.