Sydney: The stock sell-off that gripped markets Wall Street on Friday rolled into Asia on Monday, with Japanese shares heading for their biggest decline of 2019 and US futures suggesting further declines on Wall Street. Bond yields plumbed fresh lows.
Equity gauges fell more than 2 percent in Tokyo, and were down more than 1 percent in Hong Kong, Sydney and Seoul. Australia’s 10-year bond yield recorded an all-time low and Japan’s hit the lowest since September 2016, when the Bank of Japan overhauled policy to focus less on asset purchases. A closely watched gauge of Treasuries has inverted for the first time since 2007, combining with poor European PMI readings on Friday to deepen recession worries.
The global equity recovery that took benchmarks to a five-month high is now showing signs of cracking amid weakening data and a pivot by global central banks away from monetary normalization — which itself reflects concerns about the outlook. The 2019 advance in shares had taken the S&P 500 Index and MSCI World Index near levels reached during the height of last year’s rally.
“Global equities were kind of complacent” as rates markets reflected growth concerns, said Marcella Chow, global market strategist at JPMorgan Asset Management in Hong Kong. “It was the release of global PMI data last Friday that shook off the complacency,” she added.
A breakthrough in US-China trade talks and an eventual turn in economic data could give support for risk assets in time. But meantime, Chow advised dividend-rich equities and high- yield debt for an income-based strategy.
Investors also digested news that Special Counsel Robert Mueller found no evidence anyone close to President Donald Trump colluded with Russia in the 2016 presidential campaign. While Mueller failed to exonerate Trump on obstruction of justice, Attorney General William Barr said he did not find enough evidence to pursue that charge.
In the U.K., sterling dipped at the start of a week that could bring the risk of yet another vote on U.K. Prime Minister Theresa May’s Brexit plan. Chancellor of the Exchequer Philip Hammond and other cabinet colleagues publicly backed May on Sunday as several British newspapers said she is under increasing pressure to stand down over her handling of Britain’s exit from the European Union.
The Turkish lira recouped some of its Friday slump, which followed Turkey’s banking regulator starting an investigation into JPMorgan Chase & Co. and another probe of unspecified banks for stoking the currency’s plunge.
Here are some key events coming up:
Apple Inc. unveils new products including video and magazine subscriptions on Monday.
U.S.-China trade talks resume, with a cabinet-level American delegation due in China.
U.K. Parliament to vote on Tuesday on Prime Minister Theresa May’s deal to leave the European Union, which lost by wide margins on Jan. 15 and March 12.
China’s Boao Forum for Asia holds its annual conference this week. A top Chinese government leader will deliver a keynote speech, and officials including Central Bank Governor Yi Gang and Finance Minister Liu Kun are scheduled to speak.
Fed Governor Randal Quarles will speak Friday to the Shadow Open Market Committee on “Strategic Approaches to the Fed’s Balance Sheet and Communications.”
These are the main moves in markets:
Japan’s Topix index tumbled 2.7 percent as of 11:55 a.m. in Tokyo. South Korea’s Kospi index dropped 1.7 percent. Shanghai Composite Index fell 0.7 percent. Hong Kong’s Hang Seng Index retreated 1.6 percent. Australia’s S&P/ASX 200 Index slid 1.2 percent. S&P 500 Index futures dropped 0.4 percent after the underlying gauge decreased 1.9 percent Friday.
The yen rose 0.1 percent to 109.80 per dollar. The offshore yuan held at 6.7193 per dollar. The Bloomberg Dollar Spot Index rose 0.1 percent early Monday, a third day of gains. The euro was at $1.1296. The British pound was at $1.3195, down 0.1 percent.
The yield on 10-year Treasuries held at 2.44 percent after sinking 10 basis points Friday. Australia’s 10-year yield fell about five basis points to 1.78 percent.
West Texas Intermediate crude fell 1 percent to $58.46 a barrel. Gold edged 0.1 percent higher to $1,314.94 an ounce.