Asian stock rout intensifies as Singapore shares sink after holiday

SINGAPORE — Japanese stocks extended losses and Singaporean shares tumbled following a two-day break, as persistent concern over market volatility helped the yen solidify its ascent. Oil climbed back above US$28 (S$39) a barrel before an update on US stockpiles.

The Topix index fell to its lowest point since October 2014 in Tokyo as a gauge of Japanese equity volatility jumped to the highest level since August. The Straits Times Index in Singapore sank the most in three weeks while the yen strengthened a third day and gold resumed its advance. US index futures reversed some early gains as Vermont Senator Bernie Sanders defeated Ms Hillary Clinton in the New Hampshire Democratic Primary, while Mr Donald Trump prevailed over a crowded Republican field.

With equity markets reeling amid concern over the creditworthiness of European banks and the impact of oil’s decline, investors will be firmly focused on Federal Reserve Chair Janet Yellen today (Feb 10), as she testifies before the US Congress. After the Bank of Japan’s surprise move into negative interest rates largely failed to assuage market jitters, she will need to calibrate her commentary carefully to avoid further fuelling volatility.

“Having a large impact on the drop in equities is this growing concern about the sustainability of the recovery, the state of economic growth in China and, increasingly, the state of growth in the US,” Mr Russ Koesterich, global chief investment strategist for New York-based BlackRock Inc, told Bloomberg TV. “People are getting worried about the global recession, worried about growth, which is affecting not only oil and stocks but other risky assets as well.”

Treasuries are off to their best start to a year since 1988 amid demand for safe investments, and gold is near a seven-month high. While markets in Singapore and Malaysia return from Lunar New Year holidays today, mainland China, Hong Kong, Taiwan, South Korea and Vietnam remain closed.

STOCKS

The Topix fell 2.6 per cent as of 12.20pm Tokyo time, spurring the MSCI Asia Pacific Index’s 1.3 per cent drop. The Straits Times gauge slipped 1.8 per cent.

Australia’s S&P/ASX 200 Index dropped 1.6 per cent, extending losses at its lowest level since July 2013, even as Commonwealth Bank of Australia, the country’s biggest mortgage lender, rallied 1.4 per cent after reporting an increase in half-year profit. The S&P/NZX 50 Index in Wellington declined 0.9 per cent after sliding yesterday to its lowest level since Dec 16.

Futures on the Standard & Poor’s 500 index were down 0.3 per cent after rallying as much as 0.6 per cent in early Asian trading. The underlying gauge slipped 0.1 per cent yesterday.

With the New Hampshire primary results, voters in both US parties sent a rebuke to establishment candidates by embracing Trump and Sanders — a billionaire real estate mogul and a Democratic socialist — who both spoke to voter anger and anxiety about rising income inequality and a gridlocked Washington.

“I don’t see anything tonight that should move stock prices tomorrow,” Mr Howard Ward, who oversees US$42.7 billion as the chief investment officer of growth equities at Gamco Investors Inc, said by email. “The polls were pretty accurate.”

CURRENCIES

The yen extended gains after reaching the highest level since 2014 yesterday. The Japanese currency was up 0.5 per cent at 114.57 per dollar.

Traders are paying more attention to the volatility sweeping global markets than the BOJ’s monetary easing. The result is the yen has climbed against almost all of the more than 150 currencies tracked by Bloomberg since the central bank embraced negative interest rates on Jan 29. The shock announcement, which initially weakened the yen, has been overwhelmed by investors pouring into Japan’s currency as a haven.

The Australian dollar slid 0.3 per cent, as did New Zealand’s currency. The Bloomberg Dollar Spot Index, which tracks the US currency against 10 major peers, was little changed and has lost 2.5 per cent since Jan 29.

The greenback has dropped against 13 of 16 major counterparts this month as traders pared to 30 per cent the odds of a Fed interest-rate increase this year. Analysts have started to examine the prospect of the US following the euro area and Japan in adopting rates below zero if the economy deteriorates.

BONDS

Treasuries advanced for a fifth day as investors sought the safety of haven assets. The benchmark US 10-year yield dropped 2 basis points to 1.71 per cent after declining to 1.68 per cent yesterday, the lowest since February 2015.

A gauge of Asian bond risk surged as Singapore reopened after the Lunar New Year holiday. The Markit iTraxx Asia index of credit default swaps climbed to 175 basis points as of 9.37am in Singapore, up 13 basis points since Friday, according to Australia & New Zealand Banking Group Ltd. prices. The gauge was last at a higher level in June 2013, based on prices from data provider CMA.

COMMODITIES

Oil snapped a four-day losing streak, rebounding from the lowest close in almost three weeks. West Texas Intermediate crude in New York added as much as 2.2 per cent to US$28.56 a barrel while Brent futures in London were also up 2.2 per cent at US$31.

Government figures Wednesday are forecast to show a 2.85 million-barrel increase in US stockpiles last week, according to a Bloomberg survey. The CBOE Crude Oil Volatility Index, which measures expectations of price swings, rose to the highest since 2009 yesterday.

Gold traded near a seven-month high as investors assessed the outlook for US monetary policy amid swings in financial markets and concern that global growth is slowing. Bullion for immediate delivery rose 0.2 per cent to US$1,191.90 an ounce.

Copper continued its decline after Indonesia recommended Freeport-McMoRan Inc. resume shipments from its Grasberg mine, the world’s largest in terms of capacity, potentially swelling a global glut. The metal used in power cables and air-conditioners retreated 0.2 per cent to $4,499 a metric ton on the London Metal Exchange. BLOOMBERG