Global recession fears hit stocks, bonds rally

Asian shares fell on Wednesday and bonds rallied as investor sentiment soured over growing worries about world growth with trade tensions between the United States and China showing no signs of easing.

MSCI's broadest index of Asia-Pacific shares outside Japan slipped 0.5 percent after three straight days of gains. Chinese shares started on the back foot but bounced off early losses to be marginally higher. Australian shares ended 0.7 percent lower while Japan's Nikkei faltered 1.2 percent.

In an indication US markets will fall again on Wednesday, E-Minis for the S&P 500 stumbled 0.3 percent. In early European trading, the pan-region Euro Stoxx 50 futures were down 0.7 percent as were German DAX futures while those for London's FTSE and France's CAC 40 eased 0.6 percent each.

Risk aversion has increased globally in recent days as fears of world recession resurfaced amid disappointing macro data in major economies. Wins for eurosceptic parties in EU elections as well as a snap poll in Greece and political turmoil in Austria have added to the gloomy outlook.

Italy's dispute with the European Commission over its budget is also a major overhang for world markets.

In Asia, focus remains on the ongoing Sino-U.S. trade war. US President Donald Trump said on Monday that Washington was not prepared to make a deal with China yet.

In currencies, activity was muted. The dollar index was a touch lower at 97.905 but well above a recent two-week trough of 97.547.

The euro was unchanged at $.1.1159 after two straight days of falls while the British pound held at $1.2656.

In commodity markets, oil prices were subdued on Wednesday as worries the Sino-US trade war could trigger a global economic downturn dominated, despite the risk of supply shortfall from US floods and political tensions in the Middle East.

Brent crude was last off 51 cents at $69.60 per barrel while U.S. crude eased 62 cents to $58.52 per barrel.