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Asian stocks are falling as Wall Street enters a bear market

Image: Reuters Berita 24 English -  On fears that aggressive U.S. interest rate hikes might force the world's largest economy into reces...

Image: Reuters

Berita 24 English -  On fears that aggressive U.S. interest rate hikes might force the world's largest economy into recession, Asian stocks plummeted on Tuesday after Wall Street reached a certified bear market milestone and bond rates touched a two-decade high.

Outside of Japan, MSCI's broadest index of Asia-Pacific stocks was down 0.9 percent.

The S&P/ASX200 index of Australian equities fell 5% in early trade, while the Nikkei stock index of Japan fell 1.74 percent.

At the outset in Hong Kong, the Hang Seng Index was down 1.44 percent, while China's CSI300 Index was down over 1%.

The gloomy mood in Asia followed a gloomy day in the United States on Monday, when Goldman Sachs predicted a 75-basis-point rate hike at the Federal Reserve's next policy meeting on Wednesday.

"Rate hikes in the United States will be faster and greater than Wall Street anticipates," James Rosenberg, an Ord Minnett advisor in Sydney, told Reuters. "There will almost certainly be a twofold impact from lowered earnings expectations and further price-to-earnings derating."

Expectations for aggressive rate hikes in the United States grew after inflation rose by a faster-than-expected 8.6% in the year to May.

Fears of a U.S. recession prompted the S&P 500 to drop 3.88 percent, while the Nasdaq Composite fell 4.68 percent. The Dow Jones Industrial Average dropped by 2.8%.

According to a widely used definition, the benchmark S&P 500 is already down more than 20% from its most recent record closing high, confirming a bear market.

In Monday's trade in the United States, benchmark 10-year Treasury rates touched their highest level since 2011, and a major portion of the yield curve flipped for the first time since April, as investors braced for the possibility that efforts to contain rising inflation may harm the economy.

The yield on benchmark 10-year Treasury notes jumped to 3.3828 percent early in Asia, compared to a close of 3.371 percent in the United States on Monday.

The two-year yield, which rises as traders anticipate higher Fed funds rates, hit 3.4002%, compared to a US closing of 3.281 percent.

On Tuesday, ANZ strategists said, "Higher inflation, weaker growth, and higher interest rates are a destructive mix for financial assets."

The dollar fell 0.06 percent against the yen to 134.32, although it is still near to its two-decade high of 135.17 set on Monday.

The euro was unchanged at $1.0407, after losing 3.04 percent in the previous month, while the dollar index, which measures the value of the greenback against a basket of international currencies, was up at 105.19.

On Tuesday, bitcoin plunged 4.5 percent to $21,416, a new 18-month low, after a 15-percent drop on Monday as markets were shocked by crypto lender Celsius stopping withdrawals.

Crude oil in the United States fell 0.06 percent to $122.14 per barrel. Brent crude was trading at 122.14 a barrel, down 0.13 percent.

The spot price of gold was $1,818.7395 per ounce, down marginally. [GOL/]

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