Asian stocks hit as recession fears overshadow China reopening hope

HONG KONG - Asian stocks extended a global sell-off while oil held losses on growing fears Federal Reserve monetary tightening will tip the US economy into recession.

The drop followed another day deep in the red for New York's three main indexes after the heads of Wall Street's leading banks warned of tough times ahead in 2023.

JPMorgan Chase chief Jamie Dimon tipped a "mild to hard recession" and Goldman Sachs' David Solomon said jobs and pay would be hit, while Morgan Stanley and Bank of America were also uneasy about the outlook.

The comments added to the downbeat mood that has coursed through trading floors at the start of the week, after forecast-beating reports on jobs and the giant US services sector fanned worries the Fed will have to push interest rates higher than hoped.

Markets had been rising healthily ahead of Friday's employment figures after a weaker-than-expected inflation reading for October suggested the almost year-long tightening campaign was finally affecting prices.

"Any hopes that the Fed would turn more dovish in the months ahead have been dashed significantly as the vast US services industry is where sticky inflation hangs out," said SPI Asset Management's Stephen Innes.

He added that the latest readings suggest rates will go above five percent before the Fed stops hiking, while several observers have suggested they will not be reduced until 2024.

Hong Kong, Tokyo, Shanghai, Sydney, Seoul, Singapore, Mumbai, Bangkok, Manila and Jakarta all dropped.

Lauren Goodwin at New York Life Investments saw further pain ahead for markets.

"We have not yet seen the bottom on equity prices," she said, according to Bloomberg News. "While this phase of equity market volatility is likely to end in the next few months, earnings have not yet adapted to a recessionary environment."

The sombre outlook overshadowed China's moves to wind back some of its harsh Covid rules that traders hope will kickstart the world's number two economy, which has been battered this year by months of lockdowns and other containment measures.