Asian stocks retreat from three-week highs over recession fears

Tokyo — Asian stocks lost ground on Monday, retreating from more than three-week highs as worries about a global economic downturn sapped investors’ risk appetite.

Bond yields eased amid bets that a US recession would slow the Federal Reserve's aggressive tightening campaign, with markets looking for policy clues from its two-day Federal open market committee meeting, which begins on Tuesday.

At the same time, the dollar built on its recovery from a 2½-week low against major peers, supported by demand for the US currency as a safe haven.

“Risk markets are obviously priced for some kind of slowdown, but are they priced for an outright recession? I would argue no,” said Ray Attrill, head of currency strategy at National Australia Bank.

“In that sense, it's hard to say we've reached a bottom as far as risk sentiment is concerned.”

Japan's nikkei retreated 0.75%, while Chinese blue chips eased 0.13%.

Hong Kong's hang seng slid 0.45%, with its tech index tumbling 1.51%

MSCI's broadest index of Asia-Pacific shares lost 0.62% to 158.68, after touching the highest since June 29 at 160.03 on Friday.

US S&P 500 emini futures slipped 0.09%, pointing to an extension of the benchmark's 0.93% slump on Friday, when a survey showed business activity contracting for the first time in nearly two years amid persistently heated inflation and rapidly rising interest rates.

Earlier that day, data also showed eurozone business activity unexpectedly shrank.

Nasdaq futures eased 0.04%, after a 1.77% tumble for the tech-heavy stock index, as the bottom dropped out from under Snap after the Snapchat owner posted its weakest-yet sales growth.

Investors are on guard this week for how much a strong dollar will hurt financial results from heavyweights Apple and Microsoft, among others.

The dollar index — which measures the safe-haven currency against six major peers — edged 0.1% higher to 106.81, climbing further from a 2½-week low of 106.10 reached on Friday.

The greenback added 0.29% to ¥136.485, while the euro slipped 0.24% to $1.01875.

The 10-year US Treasury yield was little changed at 2.79% after sliding from as high as 3.083% over the previous two sessions.

Equivalent Japanese government bond yields dropped to the lowest since March 14 at 0.19%, and Australian yields dipped to the lowest since May 31 at 3.285%.

The Fed concludes a two-day meeting on Wednesday and markets are priced for a 75 basis-point rate hike, with about a 9% chance of a full one percentage-point increase.

In commodities, Brent crude added 0.15%, or 15c, to $103.35 per barrel. Nymex light crude was slightly higher at $94.75.

Gold slipped 0.14% to $1,724.05 per ounce.

Reuters