Fears of a US recession has helped trigger a sell-off on markets, with 3% wiped from Wall Street on Wednesday after the US yield curve inverted.
With new data indicating both Germany and China are slowing down on the back of the trade war, global markets were led lower on Thursday. The Australian stock exchange (ASX) closed 2.85% lower and Japan's Nikkei 225 fell 1.21%.
Despite falling early in the session, China managed to brush off the concerns to close 0.25% higher. Hong Kong's Heng Seng also rose on Thursday but remains seriously in the red after ten weeks of protests against a proposed extradition bill.
Stock markets around the world have been tumbling as fears emerge of a US recession and a global slowdown.
Wednesday marked the worst day on Wall Street since December 2018, with the Dow Jones, the S&P 500 and the Nasdaq all plummeting around 3%. That was on the back of the biggest indication yet the US economy would hurtle into a recession.
"The last 48 hours have been a rollercoaster for investors as trade optimism briefly stoked risk sentiment knee-jerking stocks up, but ongoing global economic growth concerns provide an oppositional force," Saxo Capital Markets strategist Eleanor Creagh said in a note, Business Insider Australia confirmed.
Those fears were compounded by data released simultaneously indicating two of the world's economic powerhouses -- China and Germany -- were slowing.
In a sign that the trade war was taking its toll on demand for Chinese goods, China's industrial output growth in July fell to its lowest level in 17 years, according to the latest official figures. Meanwhile, Germany's economy -- Europe's largest -- was shown to have shrunk 0.1% in the second quarter of 2019 due to its own decline in exports. It came just one week after the UK's shrunk for the first time since 2012, fuelling fears of a recession in Europe and beyond.
"The slew of poor data including negative (second quarter) German GDP, weak Eurozone industrial production and ubiquitously ugly China industrial data confirmed what is fast becoming a synchronised global slowdown," Creagh said. "The escalating trade tensions have become akin to pouring kerosene on a pre-existing cyclical slowdown, increasing the probability of recession."
Specifically, the inversion of the yield curve in the US -- a predictor of the last seven recession -- fed fears of a global slowdown.
Digesting that news overnight, markets in Asia opened on Thursday and their reaction was mixed.
The Australia stock exchange (ASX), the first major index to open, shed more than $US25 billion in just the first 15 minutes of the session, eventually closing down 2.85%. It marked the single worst day in more than two years for the Australian market.
Faring a little better was Japan's Nikkei 225 which closed nearly 250 points or 1.21% down, followed closely by Taiwan (-0.96%).
Interestingly, the reaction in China was more muted. Despite opening down, the Shanghai Composite ended the session 0.25% higher than it began.
Hong Kong's Heng Seng also traded higher on Thursday. It, however, has had more acute concerns with ten weeks of sustained protests wiping more than 17% of its stock market.
Korea's KOSPI was closed for a public holiday after rising the day previous. Investors will brace for how it reacts when it reopens on Friday.