Asian markets roiled by recession fears after Wall Street sell-off

Hong Kong's Hang Seng Index (HSI) was down 0.5%, while China's Shanghai Composite Index (SHCOMP)slid 1.1%. Japan's Nikkei (N225) tumbled 1.3%. All of those indexes were down even further earlier.

Australia's S&P/ASX 200 erased 2.3%. Losses deepened even more after a top Australian central banker warned that the US-China trade war is damaging global growth and risks a "self-fulfilling downturn."

South Korea's market was closed on Thursday for a public holiday.

Thursday's sell-off came after US markets plummeted in the worst day for stocks there of 2019. That happened because the bond market, for the first time in over a decade, flashed a warning signal that has an eerily accurate track record for predicting recessions.

What is the yield curve -- and why it matters

The 10-year Treasury bond yield fell below 1.6% Wednesday, dropping just below the yield of the 2-year Treasury bond. It marked the first time since 2007 that 10-year bond yields fell below 2-year yields. The inversion of that curve has preceded every recession in modern history.

Investors were spooked Wednesday because of some bad news out of Germany and China. Germany's economy shrank in the second quarter. One analyst called Wednesday's report "the end of a golden decade for the German economy."

China, meanwhile, posted its worst growth for industrial production in 17 years. The metric is important because it measures the output of key businesses in China's manufacturing, mining and utilities sectors.

"Bond markets have been flagging this move for some time, but the shift was crystallised by yesterdays run of doom and gloom European and Chinese economic data," wrote Stephen Innes, managing partner for Valour Markets Pte in Singapore, in a research note.

Australia's major index was the biggest loser early Thursday. Declines accelerated as Guy Debelle, the deputy governor of the Reserve Bank of Australia, warned of the ramifications of the US-China trade war.

"The uncertainty as to how the dispute will play out on both the trade and technology fronts means businesses are waiting to see how the uncertainty resolves rather than invest," he said, according to the text of his keynote speech to be delivered at a conference in Sydney on Thursday. "The longer businesses hold off, the weaker demand will be, which will further confirm the decision to wait. That runs the risk of a self-fulfilling downturn."

CNN Business' Paul R. La Monica contributed to this report.

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