(Bloomberg) — The stock sell-off that gripped markets Friday rolled into Asia Monday, with Japanese shares heading for their biggest decline of 2019 and U.S. futures suggesting further declines on Wall Street. Bond yields plumbed fresh lows.
Equity gauges fell more than 2 percent in Tokyo and Hong Kong, and 1 percent in Sydney, Shanghai and Seoul. AustraliaÃ¢â‚¬â„¢s 10-year bond yield recorded an all-time low and JapanÃ¢â‚¬â„¢s hit the lowest since September 2016, when the Bank of Japan overhauled policy to focus less on asset purchases. A closely watched gauge of Treasuries has inverted for the first time since 2007, combining with poor European PMI readings on Friday to deepen recession worries.
The global equity recovery that took benchmarks to a five-month high is now showing signs of cracking amid weakening data and a pivot by global central banks away from monetary normalization — which itself reflects concerns about the outlook. The 2019 advance in shares had taken the S&P 500 Index and MSCI World Index near levels reached during the height of last yearÃ¢â‚¬â„¢s rally.
Ã¢â‚¬Å“Global equities were kind of complacentÃ¢â‚¬Â as rates markets reflected growth concerns, said Marcella Chow, global market strategist at JPMorgan Asset Management in Hong Kong. Ã¢â‚¬Å“It was the release of global PMI data last Friday that shook off the complacency,Ã¢â‚¬Â she said.
A breakthrough in U.S.-China trade talks and an eventual turn in economic data could give support for risk assets in time. But meantime, Chow advised dividend-rich equities and high yield debt for an income-based strategy.
Investors also digested news that Special Counsel Robert Mueller found no evidence anyone close to President Donald Trump colluded with Russia in the 2016 presidential campaign. While Mueller failed to exonerate Trump on obstruction of justice, Attorney General William Barr said he did not find enough evidence to pursue that charge.
In the U.K., sterling steadied at the start of a week that could bring the risk of yet another vote on U.K. Prime Minister Theresa MayÃ¢â‚¬â„¢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 BritainÃ¢â‚¬â„¢s exit from the European Union.
The Turkish lira recouped some of its Friday slump, which followed TurkeyÃ¢â‚¬â„¢s banking regulator starting an investigation into JPMorgan Chase & Co. and another probe of unspecified banks for stoking the currencyÃ¢â‚¬â„¢s plunge.
Here are some key events coming up:
- Apple Inc. unveils new products including video and magazine subscriptions on Monday.
- U.S.-China trade talks resume, with a cabinet-level American delegation due in China.
- U.K. Parliament to vote Tuesday on Prime Minister Theresa MayÃ¢â‚¬â„¢s deal to leave the European Union, which lost by wide margins on Jan. 15 and March 12.
- ChinaÃ¢â‚¬â„¢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 Ã¢â‚¬Å“Strategic Approaches to the FedÃ¢â‚¬â„¢s Balance Sheet and Communications.Ã¢â‚¬Â
These are the main moves in markets:
- JapanÃ¢â‚¬â„¢s Topix index declined 2.7 percent as of 10:33 a.m. in Tokyo.
- South KoreaÃ¢â‚¬â„¢s Kospi index dropped 1.6 percent.
- Shanghai Composite fell 1.3 percent.
- Hang Seng Index retreated 1.9 percent.
- AustraliaÃ¢â‚¬â„¢s S&P/ASX 200 Index fell 1.3 percent.
- S&P 500 Index futures dropped 0.5 percent after the underlying gauge decreased 1.9 percent Friday.
- The yen was flat at 109.80 per dollar.
- The offshore yuan held at 6.7252 per dollar.
- The Bloomberg Dollar Spot Index rose 0.1 percent early Monday, a third day of gains.
- The euro was at $1.1293.
- The British pound was at $1.3190.
- The yield on 10-yearÃ‚Â Treasuries slipped to 2.43 percent after sinking 10 basis points Friday.
- AustraliaÃ¢â‚¬â„¢s 10-year yield fell about seven basis points to 1.77 percent.
- West Texas Intermediate crude fell 0.9 percent to $58.50 a barrel.
- Gold was flat at $1,314.79 an ounce.
–With assistance from Liz Capo McCormick and Alexandra Harris.
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