Asian equities dropped Monday, tracking a selloff on Wall Street as last week’s rally ran out of steam on fresh worries about rising interest rates and surging inflation.

The pound rose, however, after British Prime Minister Liz Truss replaced her finance minister and speculation swirled that she would row back on more of the debt-fuelled, tax-cutting budget that sent shivers through finance markets.

The healthy gains Asian markets enjoyed on Friday were largely wiped out in early trade as expectations about elevated prices and central bank moves to rein them in continued to fan recession fears.

Last week’s strong US inflation reading ramped up bets that the Federal Reserve will hike borrowing costs by 75 basis points twice more before the end of the year, stoking concerns the world’s top economy will flip into a recession.

All three main indexes on Wall Street finished sharply lower Friday, and Asia followed suit Monday.

Hong Kong shed more than one percent and Shanghai was also in the red, with Chinese President Xi Jinping at the weekend reasserting his commitment to the zero-Covid strategy of lockdowns that has hammered the economy this year.

There were also losses in Tokyo, Sydney, Seoul, Singapore, Taipei, Jakarta and Wellington.

Traders are also keeping tabs on looming earnings reports, with expectations that higher rates and prices will have eaten into companies’ bottom lines.

They will also be keeping a close eye on the United Kingdom as Truss battles for her political future just weeks after taking the keys to Number 10.

She sacked her finance minister Kwasi Kwarteng on Friday after coming under intense pressure following his controversial tax-cutting mini-budget.

His replacement, Jeremy Hunt, looked set to roll back several of the measures in a bid to reassure markets.

“It does indicate that they are moving back to some degree of fiscal probity and employing a slightly more prudent fiscal outlook,” said Peter Kinsella, of Union Bancaire Privee UBP SA.

The pound was holding above $1.12 in Asian trade, having sunk Friday owing to the uncertainty in Westminster, while a news conference by Truss did very little to reassure nervous investors.

Eyes are also on Tokyo as the yen sits around a three-decade low against the dollar owing to US rate hike expectations and the Bank of Japan’s refusal to tighten monetary policy, citing a need to support the economy.

The yen is approaching 150 to the dollar for the first time since 1990, but while officials have said they are keeping tabs on developments, they have yet to intervene in markets for a second time, having done so last month.

– Key figures around 0230 GMT –

Tokyo – Nikkei 225: DOWN 1.4 percent at 26,703.00 (break)

Hong Kong – Hang Seng Index: DOWN 1.3 percent at 16,365.82

Shanghai – Composite: DOWN 0.2 percent at 3,065.88

Pound/dollar: UP at $1.1236 from $1.1180 Friday

Dollar/yen: DOWN at 148.59 yen from 148.72 yen

Euro/dollar: UP at $0.9747 from $0.9724

Euro/pound: DOWN at 86.76 pence from 86.93 pence

West Texas Intermediate: UP 0.8 percent at $86.31 per barrel

Brent North Sea crude: UP 0.9 percent at $92.41 per barrel

New York – Dow: DOWN 1.3 percent at 29,634.83 (close)

London – FTSE 100: UP 0.1 percent at 6,858.79 (close)