Asian stocks extend world rout amid rising Yen while oil rallies

TOKYO — The global equity bear market deepened in Asian trading, with Japanese stocks headed for their worst week since 2008 as anxiety over the world economy and central banks’ ability to stem trading volatility fuelled a rally in the yen. Oil rebounded from a 12-year low.

The Topix index returned from holiday to a 3.2 per cent slump in Tokyo, pushing the regional Asian benchmark toward its steepest weekly drop since gyrations in Chinese assets rocked financial markets at the start of the year. US index futures signalled gains after losses there helped the MSCI All-Country Index cap a 20 per cent slide from its May record. The yen was set for its best week in more than seven years, as gold traded close to a one-year high. US crude snapped a six-day tumble, rising from a 12-year low to trim what will still be a second straight weekly decline. Sovereign bonds solidified gains.

“We’ve entered a different phase in the market,” Mr Juichi Wako, a senior strategist at Nomura Holdings Inc. in Tokyo, said by phone. “We’re not simply in a risk-off mode, the market’s fallen to the point of pricing in a recession in the US. The market is saying we’re worried no matter what Yellen says and their reaction shows there can be no real relief until we can truly see what’s happening in the US economy.”

Investors ignored a second day of testimony from Ms Janet Yellen, whose indication this week that the Federal Reserve won’t rush to raise benchmark interest rates in the face of global fluctuations failed to stem a selloff in risk assets from bank shares to crude oil and emerging-market currencies. After a move to negative rates largely failed to assuage anxieties last month, Japan stepped up its response, with Finance Minister Taro Aso saying regulators will respond to market volatility if necessary. Sweden’s Riksbank cut rates further below zero yesterday, as central bankers struggle to address the turmoil that has held global financial markets in its grip since the start of the year.

Markets in mainland China, Taiwan and Vietnam remain closed for Lunar New Year holidays on Friday. BLOOMBERG