By BLOOMBERG
Asian equities resumed their New Year tumble, wiping out last session’s rebound as the cheapest oil in 12 years and anxiety over an economic slowdown in China unsettles investors, fueling demand for the safest assets.
Japanese stocks sank the most since September, while shares in Shanghai slid below the low reached during the August market turmoil after a selloff in the US rekindled the global equity rout that has dominated trading this year. Higher-yielding currencies fell, while the yen resumed a rally that’s made it the best performer in foreign-exchange markets this year. Treasuries rose and Chinese bond yields sank to a record as Brent oil dropped back below US$30 a barrel. Nickel lead a selloff in industrial metals.
What seemed like a budding global stock rebound was quashed in the US, where a selloff in consumer and technology shares shaved more than 360 points off the Dow Jones Industrial Average and saw small-cap equities enter a bear market. Traders have been whipsawed in 2016, with equities around the world off to their worst start to a year on record as oil plummets to levels last seen more than a decade ago and China struggles to maintain control over its markets, fueling concern the slowdown in its economy will spread.
“It’s hard to get bullish at this stage,” said Michael McCarthy, chief strategist at CMC Markets in Sydney. “The market focus keeps shifting whenever there’s positive news. We saw very good trade numbers from China yesterday and yet we’ve seen the rebound being short-lived as the focus shifted to commodities. Negative sentiment is dominating.”
Stocks
The MSCI Asia Pacific Index sank 2.2% as of 11:19 am Tokyo time, falling for the eighth time in nine days to bring its retreat in 2016 to 9%. Japan’s Topix index slid 3.6%, set for its lowest close since Sept 29, while stocks in China – the epicenter of this year’s market volatility as well as the ructions last August – fell a second day, with the Shanghai Composite Index slipping 0.8%, set for its lowest close since December 2014.
The S&P/ASX 200 Index in Australia slumped 1.6%, led by technology stocks and utilities, while New Zealand’s S&P/NZX 50 Index lost 1%. The Kospi index in Seoul was down 1.3%.
S&P 500 futures rose 0.1% following the index’s 2.5% slide on Wednesday, when the Nasdaq 100 Index had its worst day since August. The Russell 2000 Index of smaller shares slipped 3.3%, bringing its drop from a peak reached in June to 22%.
Losses in US stocks are being exacerbated by forced selling on the part of commodity and other quantitative funds operating in the local futures market, according to JPMorgan Chase & Co. They were forced to rebalance their holdings as equities and bonds slumped.
“We’re in a perfect storm,” said Yousef Abbasi, global market strategist at JonesTrading Institutional Services LLC in New York. “Even though we knew a lot of these factors in the past, they all seemed to come together at the start of 2016 to take a bite out of people. There’s a combination of a buyer’s strike, some disinterest, some confusion, and to be completely honest, some exasperation. Guys are frustrated.”
Currencies
The yen strengthened 0.2% to 117.50 per dollar after posting moves of less than 0.2% in the previous two sessions as markets re-calibrated. The currency, regarded as a haven among many investors, has appreciated 2.3% versus the greenback in 2016, while the euro has risen 0.2%.
South Korea’s won dropped 0.7% after the central bank kept interest rates on hold Thursday, while one-month non- deliverable forwards on the Indonesian rupiah fell 0.5% with economists projecting a cut to the country’s benchmark borrowing costs. The Bank of England also reviews rates later in the session.
Australia’s dollar slipped 0.2 percent after a report showed employers cut jobs in December, while the New Zealand currency lost as much as 0.7 percent to its weakest level since Nov. 19. The Malaysianringgit declined 0.3 percent.
Bonds
Treasury 10-year notes rose for for a third day, with yields dropping three basis points, or 0.03 percentage point, to 2.07%.
Australian bonds followed suit, with yields on 10-year debt dropping eight basis points to 2.68%. Yields on New Zealand notes fell five basis points to 3.31%, while those on Japanese 10-year bonds dropped 1/2 basis point to 0.20%.
Commodities
Oil’s almost uninterrupted slide in 2016 has dominated market discourse, with losses amid concern over a global glut exacerbated by the gyrations in China’s stock and currency markets.
Brent extended losses below US$30 a barrel as Iran moved closer to boosting exports and US crude stockpiles expanded, exacerbating a global glut.
The International Atomic Energy Agency is expected to report Friday the Islamic Republic has fulfilled its commitments under July’s nuclear accord with world powers.
Brent for February settlement dropped as much as 1.9% to US$29.73 a barrel on the London-based ICE Futures Europe exchange. Prices on Wednesday fell to US$29.96 in intraday trade, the lowest since April 2004. West Texas Intermediate traded at US$30.47 a barrel on the New York Mercantile Exchange, down 1 cent.
Gold was little changed in the spot market, at US$1,092.28 an ounce after rising 0.7% on Wednesday.
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