Asia-Pacific markets trade lower as recession fears grow

Shares of Chinese technology companies listed on mainland exchanges fell in Asia trade after the U.S. government announced a list of companies that will face restrictions over their efforts to help modernize China's military.

Chinese artificial intelligence developer Cambricon Technologies' shares listed in Shanghai fell more than 4% in Asia's afternoon session after falling 6% in the morning.

China Electronics Technology Group also fell more than 2%.

Shenzhen-listed shares of Hangzhou Hikvision, the world's largest surveillance camera maker, fell 0.7%.

Meanwhile, WuXi Biologics, a company that manufactures ingredients for the AstraZeneca Covid vaccine, was removed from the list. Hong Kong-listed shares of the company rose more than 5% in Asia's afternoon.

— Jihye Lee

Discussions to remove the Bank of Japan's yield curve control program, which caps 10-year bond yields around 0%, could pick up next year, Reuters reported, citing people familiar with the central bank's thinking.

Senior officials are increasingly seeing a case to remove the YCC program that was introduced in 2016, as the nation's wages rise and economic risks remain contained, Reuters reported the people as saying.

While the report said there are currently no talks about a change in policy, it said there is a preference within the central bank to completely remove the cap altogether.

The Bank of Japan holds a meeting on its monetary policy later this week.

— Jihye Lee

Singapore's economy will likely contract at the start of 2023 before it rebounds in the second quarter, Euben Paracuelles, senior ASEAN economist at Nomura said.

The city-state is not going to "get into a technical recession, but in Q1 next year, we're probably going to get a contraction in the GDP number," Paracuelles told CNBC's "Squawk Box Asia" on Friday.

"Singapore being so open is very much exposed to the weakness in external demand," Paracuelles said.

Singapore is slated to report its fourth quarter GDP no later than Jan. 13.

— Charmaine Jacob

UBS upgraded its outlook for China's 2023 gross domestic product to 4.9%, versus 4.5% previously, according to its chief China economist Wang Tao, citing an earlier and faster reopening in the nation.

Wang said the firm expects a weaker fourth-quarter GDP for 2022, downgrading its full-year forecast to 2.7% from 3.1%, pointing out November's weakened growth with a recent surge in Covid cases.

The firm added that the Central Economic Work Conference will likely prioritize stabilizing growth as well as supportive macro policies for the upcoming year.

"We expect fiscal policy to stay proactive with small increase of headline deficit and new special LG [local government] bonds, monetary and credit policy to keep supportive with continued ample liquidity but unlikely any additional policy rate cut," Wang said in the note.

— Jihye Lee

Property stocks rose after Chinese state media reported Vice Premier Liu He said the government is considering new measures to support its real estate sector.

Xinhua reported that officials are weighing additional policies to boost the market's confidence and to improve balance sheets in the industry.

Country Garden rose more than 4% in the morning session, while Longfor Group gained more than 5%.

Cifi Holdings Group also gained around 3%, Logan Group climbed 3.7% and China Overseas Land & Investment rose 3.4%.

— Jihye Lee

Singapore's latest trade data suggests exports could continue to face headwinds in the short term, according to Oxford Economics.

"The bad news is that worse is to come," it said in a Friday note. "We expect external demand to soften further in the first half of 2023 as the U.S. and eurozone slip into shallow recession," it said.

Oxford Economics added the sharp fall of Singapore's non-oil exports in November shows the external sector has "graduated from a slowdown to a slump."

It added that any revival in growth due to China's early reopening will not be enough to fully offset weakened demand globally.

— Jihye Lee

Citi announced it will exit its consumer banking business in China, a move that will affect about 1,200 employees in the country.

The departure will also impact consumer products and channels including deposits, insurance, mortgages, investments, loans and cards, Citi said. It said however, the exit does not include its institutional business in China.

The company said it will start the process of winding down of its consumer banking business while engaging with regulators.

The bank first announced the plan to exit China in April 2021 as part of a broader plan to withdraw from a slate of markets across Asia, Europe, the Middle East and Africa and Mexico.

— Jihye Lee

Singapore's non-oil exports fell by 9.2% compared with a month ago, a significantly bigger drop than the 3% expected, according to a Reuters poll.

This comes after the month-on-month reading fell by 3.7% in October.

On an annualized basis, non-oil exports for November fell 14.6%, also larger than expectations for a decline of 7.4% in a Reuters survey. The year-on-year reading fell by 5.6% in October.

— Jihye Lee

The au Jibun Bank Flash Japan Manufacturing Purchasing Managers' Index fell to a seasonally adjusted 48.8 in December from a final 49.0 in the month of November, marking the lowest reading since October 2020.

"Manufacturing firms continued to struggle in the face of subdued demand conditions and severe inflationary pressures," S&P Global said in its latest release.

A reading below 50 indicates contraction from the previous month, and above 50 indicates expansion.

A stronger expansion in services output for December was reflected in the services business activity index, which rose to 51.7 in December from a final reading of 50.3 in November.

— Jihye Lee

Big Tech stocks have been hit hard by this year's sell-off, but Morgan Stanley thinks the current share price weakness of one stock presents an "opportunity to own one of the highest quality tech platforms."

Pro subscribers can read more here.

— Zavier Ong

Retail and food services sales fell 0.6% in November after rising 1.3% in the prior month, according to the Commerce Department. That was below Dow Jones estimates of a 0.3% decline.

Excluding autos, retail sales dipped 0.2%, below Dow Jones estimates for a 0.2% gain in spending.

— Sarah Min

Investor concerns that the Federal Reserve's aggressive rate hiking campaign will push the economy into a recession are growing on Wall Street.

"The Fed all year have been very consistent. They have to fight inflation, they've got to get it down, and they're going to tighten financial conditions to do so," said Huw Roberts, head of analytics at Quant Insight.

However, he said the U.S. equity markets are becoming more sensitive to real economic data, rather than financial conditions, as they head into the next calendar year.

"Increasingly, the 2023 main story will be about the real economy. In other words, just how hard a recession we're going to get, can the Fed engineer a soft landing? Or will we get a full blown ugly, hard recession?" Roberts added.

— Sarah Min

Next year's story for the stock market is all about earnings, which are going to fall significantly, said Morgan Stanley's Mike Wilson. That rapidly slowing growth isn't priced into the market yet, he said in an interview with "Squawk Box" Thursday.

"People assume earnings are going to come down, but it's the magnitude of that decline and how fast it's going to happen — we think that is where the surprise is," said Wilson, the firm's U.S. equity strategist. "That negative operating leverage that we see from that falling inflation… is what is going to hurt margins, and that's irrespective of whether there is an economic recession."

He's predicting 11% decline in year-over-year growth for S&P 500 companies next year. While his year-end target for the index is 3,900, he anticipates it will drop to between 3,000 and 3,300 in the first quarter.

The earnings recession will be brought on by a whole host of reasons, including an economy that has been overstimulated, demand destruction from higher prices and the Federal Reserve's rate hikes this year, Wilson said. There will also be a reaction from corporations.

"At some point confidence just fails and the corporations stop sending because they're like, 'We've got to batten down the hatches a little bit,'" he said.

— Michelle Fox