Friday 29 Mar 2024
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SYDNEY (Feb 6): Asian stock traders braced for a second day of heavy losses after a frantic selloff in U.S. equity markets sent the Dow Jones Industrial Average to its biggest loss in 6 1/2 years. Treasuries rallied with gold and the yen on demand for haven assets.

The S&P 500 Index sank 4.1 percent to wipe out its January gain and turn lower on the year, while the Dow lost more than 1,100 points amid rising concern that inflation will force interest rates higher. Trading volume was almost double the 30-day average. Futures in Japan signaled declines could reach 5 percent when Tokyo equity trading starts.

Selling accelerated shortly after 3 p.m. in New York, with the Dow sinking more than 800 points in a matter of 15 minutes only to snap back. The blue-chip index ended lower by 4.6 percent -- its steepest drop since August 2011. The Cboe Volatility Index, known as the VIX, more than doubled to its highest level in 2 1/2 years.

“The speed is reflective of some modern market structure issues that have come to dominate - it looked a little bit flash crashy there,” Michael Purves, Weeden & Co.’s chief global strategist, told Bloomberg TV. “The most important thing for bulls is that the bond market isn’t spiraling out of control and that’s off a record on the non-manufacturing PMI that printed earlier, so the foundation of the current bull trend is not really different just because of this violence we’re seeing on the screens today.”

Many finance professionals were left scratching their heads to explain the severity of the moves in a short space of time. Anxiety was already building about the outlook for monetary policy prior to Monday’s rout with equities being tested by the surge in bond yields. Global shares had just last month risen to record highs on optimism for expanding profits and economic growth.

Elsewhere oil slumped, however metals such as copper and nickel advanced after a Chinese purchasing managers index rose in January. Bitcoin tumbled for a fifth day, falling below $7,000.

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 Frankfurt and New York.

These are the main moves in markets:

Stocks

* Futures on Japan’s Nikkei 225 Stock Average sank 6.8 percent in Chicago trading, extending losses after the close of U.S. cash equity markets.

* Futures on Australia’s S&P/ASX 200 Index slid 2.3 percent.

* The S&P 500 fell 4.1 percent. The Dow fell 1,175.21 points.

Currencies

* The Bloomberg Dollar Spot Index gained 0.4 percent.

* The euro decreased 0.6 percent to $1.2390.

* The pound declined 1 percent to $1.3973.

* The yen gained 0.9 percent to 109.23 per dollar.

* The Australian dollar lost 0.6 percent to 78.86 U.S. cents.

Bonds

* The yield on 10-year Treasuries fell 13 basis points to 2.71 percent.

Commodities

* West Texas Intermediate crude dipped 3 percent to $63.49 a barrel.

* Gold advanced 0.5 percent to $1,339.99 an ounce.

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