Asian Stock Markets
A rout in global equities deepened in Asia on Tuesday as inflation
worries gripped financial markets, sending U.S. stock futures sinking
further into the red after Wall Street suffered its biggest decline
since 2011.
S&P mini futures fell as much as 3.0 percent to four-month lows, extending their losses from the record peak hit just over a week ago to 12 percent, abruptly ending their smooth bull run of recent years. They last stood down 1.1 percent.
The U.S. benchmark S&P 500 slumped 4.1 percent and the Dow 4.6 percent on Monday, suffering their biggest percentage drops since August 2011.
Before Monday’s fall, the index had not seen a pullback of more than 5 percent for more than 400 sessions, which analysts said was the longest such streak in history.
The gloom is seen enveloping European shares, with spread-betters expecting Germany’s Dax to sink 6.6 percent to five-month lows, France’s Cac 6.1 percent to possibly 11-month lows and Britain’s FTSE 4.8 percent to 14-month lows.
In Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan slid 3.4 percent. Taiwan shares lost 5.0 percent, its biggest since in 2011 and Hong Kong’s Hang Seng Index dropped 4.2 percent.
Japan’s Nikkei dived 4.7 percent, its worst fall since November 2016, to four-month lows.
The trigger for the sell-off was a sharp rise in U.S. bond yields following Friday’s data that showed U.S. wages increasing at the fastest pace since 2009, raising the alarm about higher inflation and with it potentially higher interest rates.
That could be painful for markets that have been propped up by central banks’ stimulus for many years.
Some analysts also say markets tend to get edgy when the U.S. Federal Reserve has a new leadership.
The new Fed chief Jerome Powell, who succeeded Janet Yellen this month, is expected to continue Yellen’s stance of gradual tightening. Still, some investors regard a change in the Fed leadership as a source of policy uncertainty.
The 10-year U.S. Treasuries yield rose to as high as 2.885 percent on Monday, its highest in four years and 47 basis points above the 2.411 percent seen at the end of 2017.
But a massive fall in share prices prompted an about-turn, and in Asian trade on Tuesday, it fell back to as low as 2.662 percent.
Keen to avoid further risk, investors are closing their positions in other assets, including the currency market where a popular strategy has been to sell the dollar against the euro and other currencies seen as benefiting from higher interest rates in the future.
Against the yen, which is often used as a safe-haven currency because of Japan’s solid current account surplus, the dollar slipped 0.2 percent to 108.86 yen, after having lost one percent on Monday.
Investors also dumped junk bonds, with the yield of Merrill Lynch U.S. high yield index rising to 6.017 percent from 5.964 percent at the end of last week.
S&P mini futures fell as much as 3.0 percent to four-month lows, extending their losses from the record peak hit just over a week ago to 12 percent, abruptly ending their smooth bull run of recent years. They last stood down 1.1 percent.
The U.S. benchmark S&P 500 slumped 4.1 percent and the Dow 4.6 percent on Monday, suffering their biggest percentage drops since August 2011.
Before Monday’s fall, the index had not seen a pullback of more than 5 percent for more than 400 sessions, which analysts said was the longest such streak in history.
The gloom is seen enveloping European shares, with spread-betters expecting Germany’s Dax to sink 6.6 percent to five-month lows, France’s Cac 6.1 percent to possibly 11-month lows and Britain’s FTSE 4.8 percent to 14-month lows.
In Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan slid 3.4 percent. Taiwan shares lost 5.0 percent, its biggest since in 2011 and Hong Kong’s Hang Seng Index dropped 4.2 percent.
Japan’s Nikkei dived 4.7 percent, its worst fall since November 2016, to four-month lows.
The trigger for the sell-off was a sharp rise in U.S. bond yields following Friday’s data that showed U.S. wages increasing at the fastest pace since 2009, raising the alarm about higher inflation and with it potentially higher interest rates.
That could be painful for markets that have been propped up by central banks’ stimulus for many years.
Some analysts also say markets tend to get edgy when the U.S. Federal Reserve has a new leadership.
The new Fed chief Jerome Powell, who succeeded Janet Yellen this month, is expected to continue Yellen’s stance of gradual tightening. Still, some investors regard a change in the Fed leadership as a source of policy uncertainty.
The 10-year U.S. Treasuries yield rose to as high as 2.885 percent on Monday, its highest in four years and 47 basis points above the 2.411 percent seen at the end of 2017.
But a massive fall in share prices prompted an about-turn, and in Asian trade on Tuesday, it fell back to as low as 2.662 percent.
Keen to avoid further risk, investors are closing their positions in other assets, including the currency market where a popular strategy has been to sell the dollar against the euro and other currencies seen as benefiting from higher interest rates in the future.
Against the yen, which is often used as a safe-haven currency because of Japan’s solid current account surplus, the dollar slipped 0.2 percent to 108.86 yen, after having lost one percent on Monday.
Investors also dumped junk bonds, with the yield of Merrill Lynch U.S. high yield index rising to 6.017 percent from 5.964 percent at the end of last week.
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