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By Anshuman Daga
SINGAPORE, May 10 (Reuters) - Asian shares fell to their lowest in nearly two years on Tuesday, as investors fretted about the toxic cocktail of rising interest rates and lower economic growth.
Growing fears of recession and a slowdown in China dragged down commodity-linked currencies and oil prices, though safety flows kept the dollar near 20-year highs.
MSCI's broadest index of Asia-Pacific shares ex-Japan tumbled as much as 2.3% to 515.7, sliding for a seventh straight session and extending losses to 18% so far this year. The benchmark later pared losses to trade down 1.3%.
Across Asia, share indexes were a sea of red but traded above the day's lows in volatile markets. The Nikkei lost 0.9%, Australian shares shed 1.3%, Korean stocks lost 1.2% and Taiwan equities were down 0.3%.
"Chinese growth is facing significant headwinds, whether you look at official or private sector Purchasing Managers' Index," said Song Seng Wun, an economist at CIMB Private Banking.
"Softening global growth is the persistent wall of worry for markets as investors look beyond the next 3-6 months. The view on growth momentum seems to be that revenge spending after the pandemic may be affected by higher borrowing costs," he said.
MSCI's Asian benchmark fell to the lowest since early July 2020. Chinese equities are the worst performers among major markets so far this year, recording losses of between 21 and 25%. Singapore and Indonesian stock indexes have, however, ticked up.
Growth worries resurfaced after central banks in the United States, Britain and Australia raised interest rates last week and investors girded for more tightening as policymakers fight soaring inflation.
Hong Kong's benchmark share index returned from a one-day holiday sharply lower on Tuesday and slumped more than 4% before nearly halving losses.
On Monday, Shanghai and Beijing tightened COVID-19 curbs which have already taken a heavy toll on the world's second-largest economy. China's export growth slowed to its weakest in almost two years, data showed, as the central bank pledged to step up support for the slowing economy
U.S. stock futures turned positive after declining earlier. S&P 500 stock futures rose 0.4%, Dow Jones futures ticked up 0.3% and Nasdaq futures gained 0.7%.
Overnight, U.S. stocks extended Friday's bruising sell-off as investors rushed to protect themselves against the prospect of a weakening economy.
"The idea of a benign and gentle tightening cycle has evaporated," ANZ analysts said in a report.