By Adam Haigh 2018/02/05 5:36 [GMT+8]
Asian shares tumble after S&P 500 Index fell 2.1% Friday
Ten-year Treasury yield at four-year high, around 2.87%
Stefan Hofer, Asia executive director and investment strategist at LGT Bank, discusses global markets.
Asian equities fell and U.S. stock futures headed lower, extending the biggest selloff for global stocks in two years as investors adjusted to a surge in global bond yields.
Shares sank across the region, putting the MSCI Asia Pacific Index on course for its biggest drop in almost 14 months. Benchmarks in Tokyo tumbled more than 2 percent, while S&P 500 Index futures were 0.4 percent lower. The 10-year Treasury yield neared 2.87 percent after solid jobs data on Friday showed rising wages. The yen advanced.
“It’s likely the pullback has further to go as investors adjust to more Fed tightening than currently assumed,” said Shane Oliver, Sydney-based global investment strategist at AMP Capital Investors Ltd., which oversees about A$179 billion ($141 billion). “The pullback is likely to be just an overdue correction, with say a 10 percent or so fall, rather than a severe bear market -- providing the rise in bond yields is not too abrupt and recession is not imminent in the U.S. with profits continuing to rise.”
The re-pricing of markets has come as investors question whether the Federal Reserve will keep to a gradual pace of monetary tightening, and whether it may need to end up boosting interest rates by more than previously expected in coming years. A higher so-called terminal rate for the Fed’s target implies higher long-term yields -- raising borrowing costs across the economy.
Yields on 10-year Treasuries have climbed to a four-year high from 2.40 percent at the start of the year. Last week’s decline for global stocks follows one of the best starts to a year on record amid hopes for ever-expanding corporate profits and growth in the world economy that’s broadening. The MSCI All Country World Index tumbled 3.4 percent last week, its biggest such slide since January 2016.
Elsewhere, oil extended declines after U.S. explorers raised the number of rigs drilling for crude to the most since August. Bitcoin dipped below $8,000.
Terminal users can read more in our markets blog.
Here are some key events scheduled for this week:
- Monetary policy decisions are due in Australia, Russia, India, Brazil, Poland, Romania, the U.K., New Zealand, Serbia, Peru, and the Philippines.
- Earnings season continues with reports from Bristol-Myers Squibb, Ryanair, Toyota Motor Corp., BNP Paribas, BP, General Motors, Walt Disney, SoftBank, Sanofi, Philip Morris, Total, Tesla, Rio Tinto, L’Oreal and Twitter.
- Dallas Fed President Robert Kaplan and New York Fed President William Dudley are among policy officials due to speak in New York.
These are the main moves in markets:
- Japan’s Topix index declined 2.2 percent, on course for its biggest slide since November 2016, and the Nikkei 225 Stock Average sank 2.4 percent.
- Hong Kong’s Hang Seng Index slid 1.8 percent and the Hang Seng China Enterprises Index lost 2 percent. The Shanghai Composite Index was down 0.3 percent.
- South Korea’s Kospi index fell 1.7 percent.
- Australia’s S&P/ASX 200 Index dropped 1.8 percent and New Zealand’s S&P/NZX 50 Index sank 1.6 percent.
- The MSCI Asia-Pacific Index fell 1.7 percent, set for its biggest decline since December 2016.
- The Bloomberg dollar spot index declined 0.1 percent as the yen firmed.
- The yen was up 0.3 percent to 109.87 per dollar.
- The euro was little changed at $1.2465.
- The pound was steady at $1.4122.
- The Aussie dropped 0.1 percent to 79.26 U.S. cents, paring an earlier loss of as much as 0.5 percent.
- The yield on 10-year Treasuries rose about two basis point to 2.86 percent, after climbing five basis points on Friday.
- Australia’s 10-year bond yield jumped almost eight basis points to 2.91 percent.
- West Texas Intermediate crude fell 1.1 percent to $64.75 a barrel.
- Gold lost 0.2 percent to $1,331.18 an ounce.