Asian markets fell on Monday as traders weighed the prospect of a global recession caused by central bank moves to fight inflation.

Equities took a turn south last week after monetary policymakers around the world signalled that while price rises appeared to be stabilising, more work would be needed to get them under control.

All three main indexes on Wall Street ended sharply lower Friday after the Federal Reserve warned that it would continue tightening monetary policy into 2023.

That was followed by similar warnings from the European Central Bank and Bank of England, while data suggested economies were feeling the pinch, dealing a blow to sentiment heading into the Christmas break.

"With no shortage of economic headwinds, investors struggle to find something cheerful about this holiday week after the two most dominant central banks cast a pall over the proceedings," said SPI Asset Management's Stephen Innes.

The sell-off in New York fed through to Asia, where Tokyo shed more than one percent, while Hong Kong, Shanghai, Taipei, Manila, Bangkok, Jakarta and Wellington were all in negative territory.

However, Singapore and Mumbai edged up, while London, Paris and Frankfurt opened higher.

"A Santa rally looks doubtful given elevated growth risks and hawkish central banks rhetoric," said National Australia Bank's Tapas Strickland.

Adding to the downbeat mood was a spike in Covid-19 cases in China following the country's reopening after almost three years of strict containment measures.

While the move is expected to boost the world's number two economy, there is a worry that businesses and China's health system will be hit in the near term.

Still, Beijing flagged a number of measures aimed at kickstarting growth next year, including support for the beleaguered property sector.

Sylvia Jablonski of Defiance ETFs had an upbeat outlook.

She told Bloomberg Radio that "the market will look through the expectations of a future recession at some point and come back in because equities are starting to look cheaper and cheaper as we go along here".

An expected pick-up in demand from the country helped drive a rally in oil prices, with both main contracts up more than one percent.

- Key figures around 0820 GMT -

Tokyo - Nikkei 225: DOWN 1.1 percent at 27,237.64 (close)

Hong Kong - Hang Seng Index: DOWN 0.5 percent at 19,352.81 (close)

Shanghai - Composite: DOWN 1.9 percent at 3,107.11 (close)

London - FTSE 100: UP 0.4 percent at 7,355.10

Euro/dollar: UP at $1.0633 from $1.0589 on Friday

Pound/dollar: UP at $1.2201 from $1.2140

Euro/pound: DOWN at 87.13 pence from 87.22 pence

Dollar/yen: DOWN at 135.83 yen from 136.68 yen

West Texas Intermediate: UP 0.4 percent at $74.58 per barrel

Brent North Sea crude: UP 0.5 percent at $79.46 per barrel

New York - Dow: DOWN 0.9 percent at 32,920.46 (close)

dan/sco/pbt

NATIONAL AUSTRALIA BANK

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Most markets drop as central banks crush Christmas spirit
Hong Kong (AFP) Dec 16, 2022
Most stock markets fell Friday as investors contemplated interest rates going higher than expected for an extended period after central banks reaffirmed their commitment to bringing down inflation. After a healthy rally in recent weeks fuelled by signs that price rises were slowing, the US Federal Reserve and European Central Bank this week crushed any Christmas spirit by hiking borrowing costs again and warning of more pain to come. While inflation in most countries has started coming down from ... read more