Asian shares on edge after nine-day rout, mood shaky as volatility spikes
SINGAPORE (Reuters) – Asian shares appeared tentative on Friday, holding steady after a nine-day losing streak, but sentiment was frail after Wall Street shares crumbled and expectations of market volatility shot up to an eight-month high.
Worries about the economic impact of a Sino-US trade war, a spike in US bond yields this week and caution ahead of earnings seasons are all cited as potential reasons behind the selloff, the biggest market rout since February.
MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS rose 0.2 percent after the opening of the South Korea and Australian markets, a day after it fell 3.6 percent to hit 1-and-a-1/2 year low.
Japan’s Nikkei fell 0.6 percent.
The US S&P 500 lost 2.06 percent to a three-month low, following on from a 3.29 percent drop on Wednesday.
US stock futures rebounded 0.6 percent in early Asia on Friday, in part helped by media report that the US Treasury Department will not call China a currency manipulator in an upcoming report.
“The (US share) market is now about seven percent off of its 100-day high, but this is far from a rare occurrence historically. Indeed, history is littered with over five percent-ish type selloffs in the midst of economic expansions,” wrote economists at RBC Capital Markets.
Still, sentiment remains shaky with the Cboe Volatility index .VIX rising to 24.98, its highest close since Feb. 12, a day after the S&P 500 fell more than 3 percent.
“There still appears to be downside risk to the market amid worries the Sino-US trade war may be slowing down global growth,” said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management in Tokyo.
Indeed, so far this week Chinese and US shares are among the worst performers in a sign that investors’ worries about the trade war are deepening.
MSCI’s China A-shares index .MICNA0000PUS is down almost 10 percent while MSCI’s US index .MIUS00000PUS shed 5.5 percent, compared with a 4.9 percent fall for MSCI’s gauge of stock performance in 47 countries .MIWD00000PUS.
Gold XAU=, typically seen as a safe-haven asset at times of high uncertainty, jumped 2.5 percent, its biggest daily gain since June 2016.
Flight-to-quality bids boosted prices of US Treasury bonds, pushing down yields. The yield on 10-year notes fell to 3.146 percent US10YT=RR, off a seven-year high of 3.261 percent touched on Tuesday on fears about inflation.
The fall in US yields helped push the dollar lower as it undermines the attraction of investments in dollar bonds.
The euro traded at $1.1593 after a gain of 0.65 percent.
The yen hit a three-week high of 111.83 to the dollar and last stood at 112.06.
The Chinese yuan also gained about 0.65 percent in offshore trade to 6.8817 to the dollar, rebounding from an eight-week low set earlier on Thursday.
Oil prices slumped to more than two-week lows.
Brent crude futures LCOc1 fell $2.83 to settle at $80.26 a barrel, a 3.4 percent loss, after hitting a low of $79.80, the weakest since Sept. 24. The global benchmark has retreated after hitting a four-year high of $86.74 on Oct. 3. Brent last stood at $80.33.