Stock markets in Asia and the US have fallen sharply over concerns that rising prices will send the global economy into a slowdown.

US shares saw their biggest one-day drop since 2020 after downbeat earnings reports from some of America’s biggest retailers.

Target said unexpectedly high fuel and freight costs had cut into profits, which halved compared with a year ago.

That followed a similarly downbeat update from rival Walmart earlier.

Japan’s benchmark Nikkei index was 2.6% lower in Asia morning trade, while Hong Kong’s Hang Seng was down 3.3%.

That came after the S&P 500 index, which tracks shares of a wide swathe of America’s biggest companies, plunged more than 4% and the Dow Jones Industrial Average dropped 3.5%.

The tech-heavy Nasdaq fell 4.7%. The falls added to weeks of declines on US financial markets.

“What people are worried about after seeing Target is, will more earnings [estimates] have to be taken down?” said Thomas Hayes, chairman of Great Hill Capital in New York.

“Consumer sentiment is at multi-year lows and tied at the hip with inflation. So people are looking for signs of inflation moderating, and Target did not give them any today.”

Target’s update sent its shares plunging 25% – the biggest decline in more than three decades.

The announcements from Target and Walmart were closely watched for signs of how consumer spending is holding up in the world’s largest economy, as inflation reaches 40-year highs.

Official US government data recently showed retail sales rose a healthy 0.9% in April, but some analysts have warned the figures may be understating signs of slowdown – especially for lower-income families – since they are not adjusted for inflation.

Earlier this year, Amazon reported a surprise drop in online sales in the first three months of the year.

Target said sales at stores open for at least a year were up more than 3% in the three months to May compared to 2021. But executives said as prices rise, shoppers are spending more on essentials and cutting back on discretionary items, such as television sets and apparel.

It warned investors that costs would be $1bn higher than expected this year, driven by fuel and freight. The firm said it did not see supply chain pressures clearing until at least 2023.