The sell-off in stocks continued across Asia Pacific on Tuesday as fears mounted of a recession in the United States and a slowdown in the global economy.
Japan’s Nikkei index fell 1.7 percent in afternoon trading, while China’s Shanghai Composite Index was off 0.5 percent. In Australia, the key stock index tumbled about 4 percent, to its lowest levels in two years.
The market declines followed weakness in the United States, where stocks lost 3.9 percent on Monday to close in bear market territory. After reaching a record high in January, the S&P 500 has fallen more than 20 percent, the seventh bear market in the last 50 years.
The markets have been shaken by the broad geopolitical concerns and inflationary pressures. In the United States, investors are worried that rising prices could trigger the biggest interest rate increase by the Federal Reserve since 1994.
The question for the markets, said Bruce Pang, a Hong Kong-based analyst with China Renaissance Securities, is whether the Fed can strike the right balance between curbing rampant inflation and not applying the brakes too aggressively on the U.S. economy. “Investors are just re-evaluating global risk,” said Mr. Pang. “They want to play it safe.”
The economic troubles have been compounded by Russia’s invasion of Ukraine. The war has further strained an already stretched global supply chain while weighing on global food and oil supplies. As inflation surges, central banks around the world have been moving to raise rates.
China is also complicating the global outlook. As the Chinese government doggedly pursues a zero-Covid strategy, the resulting lockdowns and restrictions have crimped growth. Chinese officials are increasingly concerned about the state of the economy, raising doubts that the country will meet its growth targets.
Given the swirl of concerns, economists have been rapidly cutting their global growth estimates. The World Bank issued a grim warning last week, saying recession will be hard for many countries to avoid.
On Monday, the credit rating firm Fitch cut its 2022 forecast for global gross domestic product, or G.D.P., to 2.9 percent, from a March estimate of 3.5 percent.
It cited concerns about inflation and a “restrictive” monetary policy and noted that the war between Russia and Ukraine are having a “swifter impact on European inflation than expected.” It also slashed growth projections for China because it did not expect the economy to bounce back quickly as long as the government remains committed to the zero-Covid policy.