HONG KONG – Asian markets were weaker on Friday as investors braced for a US rate hike next week amid growing concerns of a global recession following warnings from the World Bank and the International Monetary Fund.
MSCI's broadest index of Asia-Pacific shares outside Japan was down 0.3 percent on Friday, after US stocks ended the previous session with mild losses. The index is down 4.1 percent so far this month.
Australian shares were down 0.94 percent on Friday, while Japan's Nikkei stock index slipped 1.2 percent.
The weaker session followed broad declines across the major US equities markets.
The Dow Jones Industrial Average fell 173.27 points, or 0.56 percent, to 30,961.82, the S&P 500 lost 44.66 points, or 1.13 percent, to 3,901.35 and the Nasdaq Composite dropped 167.32 points, or 1.43 percent, to 11,552.36.
The global economic outlook remains downbeat and some countries are expected to slip into recession in 2023, but it is too early to say if there will be a widespread global recession, the IMF said on Thursday.
The IMF in July revised down global growth to 3.2 percent in 2022 and 2.9 percent in 2023. It will release a new outlook next month.
In comparison, the World Bank said the world could be edging towards a global recession in 2023 as central banks across the world simultaneously hike interest rates to combat persistent inflation.
Indermit Gill, the World Bank's chief economist, said on Thursday he was concerned about "generalized stagflation," a period of low growth and high inflation, in the global economy, noting the bank had pared back forecasts for a majority of countries.
In Asian trade, the yield on benchmark 10-year Treasury notes stood at 3.4509 percent compared with its US close of 3.459 percent on Thursday.
The two-year yield, which rises with traders' expectations of higher Fed fund rates, touched 3.871 percent compared with a US close of 3.873 percent.
Two-year Treasury yields hit a new 15-year high after mixed US retail sales and jobless claims data, which analysts said reinforced the case for aggressive Federal Reserve rate hikes.
Markets are currently fully pricing in a 75 basis point rate hike next week, economists said.
"Equities and other risk-sensitive markets struggle as it becomes clear that US inflation pressures are well embedded and that risks to the fed funds rate lie to the upside," ANZ economists said on Friday.
The dollar dropped 0.4 percent against the yen to 142.95.
The euro was up 0.1 percent on the day at US$1.0006, having lost 0.51 percent in a month, while the dollar index, which tracks the greenback against a basket of currencies of other major trading partners, was up at 109.59.
US crude ticked up 0.14 percent to US$85.22 a barrel. Brent crude rose to US$90.98 per barrel.
Gold was slightly lower. Spot gold was traded at US$1662.49 per ounce.