(March 25): Stocks in Asia looked set to track heavy losses in U.S. equities as bond yields continued to march lower amid concerns that momentum is slowing in the global economy.
The risk-off tone that built on Friday looks set to extend into Asia early Monday, as futures signaled losses for equities in Japan, Australia and Hong Kong. Australia’s 10-year bond yield hit an all-time low after the yield on Germany’s 10-year bonds tumbled below zero and a closely watched gauge of Treasuries inverted for the first time since 2007, underscoring the return to globally low long-term rates.
Global equities are showing signs of cracking, after rising to a five-month high, amid a slew of weakening economic data and commentary on the slowing world expansion from the Federal Reserve and others that’s helped embolden a rally in sovereign bonds. Gains in stocks left the S&P 500 Index and MSCI World Index trading near the levels they were at during the height of last year’s market rally.
“I’m starting to worry that the U.S. could be facing a more severe downturn next year,” said Erik Nielsen, chief economist at UniCredit Bank AG in London. “Markets will be volatile most of this year, along a risk-off path. I’ll sell on strengths, and I don’t buy much on weakness.”
Elsewhere, sterling steadied 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 declined after Turkey’s banking regulator started 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.K. Parliament to vote 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:
Futures on Japan’s Nikkei 225 declined 1.7 percent in Singapore late Friday. Hang Seng Index futures dropped 1.4 percent. Futures on Australia’s S&P/ASX 200 Index fell 0.8 percent. The S&P 500 Index decreased 1.9 percent.
The yen was steady at 110 per dollar. The offshore yuan held at 6.7245 per dollar. The Bloomberg Dollar Spot Index rose 0.2 percent Friday. The euro decreased 0.1 percent to $1.1293. The British pound held at $1.3213.
The yield on 10-year Treasuries sank 10 basis points to 2.44 percent Friday. Australia’s 10-year yield fell six basis points to 1.77 percent.
West Texas Intermediate crude sank 1.6 percent to $59.04 a barrel. Gold advanced 0.3 percent to $1,313.68 an ounce. - Bloomberg