Asian stocks sold off sharply on Tuesday with investors growing increasingly nervous about the extent of China’s recovery and potential US restrictions on investments in the world’s second-biggest economy.

China’s CSI 300 index dropped 0.8 per cent, taking its decline since last Tuesday to more than 5 per cent. Hong Kong’s Hang Seng index slipped 1.9 per cent, with all sectors bar energy in negative territory, while the Hang Seng Tech index fell 3.6 per cent, on track for its biggest daily decline since early February. The index has fallen by just over a tenth in the past week.

Each of the indices began to slide soon after China announced better than expected gross domestic product figures and a huge 14.8 per cent surge in year-on-year exports in March, defying analysts’ expectations of a contraction of 7 per cent.

“It’s well known that the Chinese data ‘contains water’, ie, being overstated”, said Qi Wang, chief executive at fund manager MegaTrust Investment in Hong Kong. “The March export number is most suspicious . . . I don’t think the market is fully convinced of the strong export growth last month.”

The looming threat of curbs on US investments in parts of China’s economy — including in artificial intelligence, quantum computing and semiconductor groups — has also weighed on investor sentiment. US president Joe Biden next month plans to limit such investments, according to Bloomberg, in a move that could further bifurcate the global economy.

European stocks also opened lower, with the region-wide Stoxx 600 down 0.4 per cent and Germany’s Dax down 0.1 per cent. London’s FTSE 100 shed 0.4 per cent after figures out on Tuesday showed the UK government borrowed significantly less than official forecasts in the 2022-23 financial year.

Contracts tracking Wall Street’s benchmark S&P 500 and those tracking the tech-heavy Nasdaq 100 both fell just over 0.4 per cent ahead of the New York open and a busy day of first-quarter results.

Shares in California-based lender First Republic sank 22 per cent in pre-market trading after it said customers pulled more than $100bn of deposits last month during a panic in the banking industry.

Google-parent Alphabet and Microsoft are both set to report first-quarter earnings later in the day, with their shares up 18 per cent and 17 per cent respectively since the start of the year.

The S&P 500 has risen about 8 per cent since January even as investors have grown more concerned about the prospect of an economic slowdown. But analysts at JPMorgan said the “underlying market breadth by some measures is the weakest ever”, with a small group of large technology shares accounting for a disproportionate chunk of the S&P’s gains.

“The current degree of crowding implies the risk of recession is far from priced in,” the broker said.

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