Asian Stocks sank due to Rising Inflation and China COVID-19 Worries

Asian stocks fell further on Monday and bond yields ticked higher as rising inflation reignited worries about even more aggressive U.S. interest rate increases amid new mass COVID-19 testing in China sparked concerns of more crippling lockdowns.

MSCI's benchmark Asia-Pacific equity index slumped 2.66%. The stock weakness was expected to extend into U.S. and European trading with futures pointing to a 1.67% drop for the S&P 500, a 1.4% retreat for Germany's DAX and a 0.77% slide for Britain's FTSE.

Jeffrey Halley, senior market analyst at OANDA, wrote in a client note, "It is turning into a Black Monday in Asia."

"The R-word (is) now on everyone's lips" amid "a scramble to reassess Fed hiking expectations," he added in the note.

Focus in Asia was on the risk of fresh COVID-19 lockdowns with Beijing's most populous district of Chaoyang announcing three rounds of mass testing to quell a "ferocious" COVID-19 outbreak that emerged at a bar.

Shanghai conducted mass testing to contain a jump in cases tied to a hair salon.
Chinese blue chips dropped 1.42% and Hong Kong's Hang Seng suffered a 3.29% slide. Japan's Nikkei slumped 3.03% and South Korea's Kospi declined 3.27%. Australian markets were closed for a holiday.

China's Growth shares sagged, with tech giants listed in Hong Kong slumping 4.45%. Index heavyweights Alibaba (NYSE:BABA), Tencent and Meituan were each down between 4% and 6%.