Asian stocks sank to their lowest level in nearly two years as investors fretted over the toxic combination of rising interest rates and slower economic growth.

Fears of a recession and a downturn in China weighed on commodity-linked currencies and oil prices, but safety flows held the dollar at 20-year highs.

MSCI's broadest index of Asia-Pacific equities outside Japan fell as high as 2.3% to 515.7, falling for the seventh consecutive day and extending losses to 18% so far this year. Later, the benchmark's decline was reduced to 1.3 percent.

In turbulent markets, share indexes across Asia were a sea of red but traded above the day's lows. The Nikkei fell 0.9%, Australian markets down 1.3%, Korean stocks fell 1.2%, and Taiwanese stocks fell 0.3%.

Whether you look at the official or private sector Purchasing Managers' Index, the Chinese economy faces considerable headwinds, according to Song Seng Wun, an economist at CIMB Private Banking.

"As investors look beyond the next 3 to 6 months, a recurring source of market anxiety is a slowing global economy. Higher borrowing prices may have an impact on post-pandemic retaliation expenditure, according to one theory on the growth momentum "He stated.

The MSCI Asia benchmark reached its lowest level since early July 2020. Chinese shares have seen losses between 21 and 25 percent this year, the worst performance among global markets. Nonetheless, Singaporean and Indonesian stock indices have increased.

As central banks in the United States, Britain, and Australia boosted interest rates last week, growth concerns returned, and investors braced for further tightening as authorities battle increasing inflation.

After a one-day holiday on Tuesday, Hong Kong's benchmark share market resumed dramatically lower and fell more than 4 percent before roughly halving losses.

Monday, Shanghai and Beijing reinforced COVID-19 restrictions that have already taken a devastating toll on the world's second-largest economy.

China's export growth slumped to its lowest level in nearly two years as the central bank pledged to increase support for the faltering economy.

After dropping earlier, U.S. stock futures turned positive. Futures for the S&P 500 increased by 0.4%, Dow Jones futures by 0.3%, and Nasdaq futures by 0.7%.

Overnight, U.S. stocks extended Friday's punishing decline as investors hurried to hedge against the possibility of a weaker economy.

ANZ analysts stated in research that the notion of a gentle and gradual tightening cycle has vanished.

"The reality is that the Fed cannot control the supply side of the economy in the short-run, so as long as key indicators like the labour force participation rate stay low and Chinese exports slow, the risk to inflation, and therefore interest rates, lies to the upside," ANZ said.

Oil prices declined due to demand concerns as coronavirus lockdowns in China, the world's largest oil importer, persisted.

Brent crude sank 1 percent to $104.75 per barrel, and U.S. West, Texas Intermediate crude, fell 1.1 percent to $101.96 per barrel, adding to the previous session's 6 percent decline. Both contracts are up approximately 35% so far this year.

As oil prices declined, commodity-linked currencies, such as the Australian and Canadian dollars, suffered.

The Australian dollar fell as low as $0.6920, its lowest level since July 2020, after falling 1.7% overnight. The Canadian dollar fell to C$1.3037 per dollar, its lowest level since November 2020.

The dollar index was unchanged at 103.6, reaching a new 20-year high of 104.19 overnight.

U.S. Treasury yields took a respite as Atlanta Fed President Raphael Bostic pushed back on speculations of a vast 75 basis point rate hike at the Fed's upcoming meeting.