Stocks Slide Again As Bond-Yield Drop Stokes Worry: Markets Wrap

Stocks declined again across much of Asia as the precipitous drop in developed-market sovereign bond yields continued to unnerve investors about the economic outlook.

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Yields on 10-year Treasuries hit a fresh 15-month low on Thursday in Asia, Australian ones recorded the lowest on record, and Japan’s fell to the lowest since August 2016. Japanese shares led declines in the region, sliding 1.7 percent. Losses were more modest in China and South Korea, while Hong Kong fluctuated. U.S. futures fell after the S&P 500 Index dropped on Wednesday, while those in Europe edged higher. The yen headed higher as haven demand emerged.

Britain’s pound traded at the weaker end of its recent range after the U.K. Parliament rejected eight possible options for a new Brexit strategy, leaving the Brexit outlook all the muddier. Elsewhere, rates on benchmark German Bunds sank further below zero after European Central Bank President Mario Draghi said an accommodative stance is still needed.

Recent data showing weakness in U.S. housing and consumer sentiment fed into the growth concerns that have helped stoke the bond rally over the past week. Federal funds futures are now pricing in more than a quarter point of easing by the end of 2019.

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Everything is going ‘mad’ in the bond market — read more here.

“We are worried about the short term because the Fed is as dovish as they can be in the short term,” Chris Harvey, head of equity strategy at Wells Fargo (WFC) in New York, told Bloomberg TV. “Interest rates are coming down throughout the globe, fears of recession are starting to go higher. We don’t think those fears are founded — but you have to acknowledge that that’s going to weigh on markets in the short term.”

Here are some key events coming up:

U.S.-China trade talks resume, with a cabinet-level American delegation due in China. Fed official Randal Quarles will speak Friday to the Shadow Open Market Committee on “Strategic Approaches to the Fed’s Balance Sheet and Communications.”

These are the main moves in markets:

Stocks

The MSCI Asia Pacific Index slid for a second day, losing 0.4 percent at 3:27 p.m. in Hong Kong. Japan’s Topix index retreated 1.7 percent at the close. South Korea’s Kospi index retreated 0.8 percent. Hong Kong’s Hang Seng Index reversed losses of as much as 0.6 percent. The Shanghai Composite dropped 0.9 percent. Australia’s S&P/ASX 200 Index rose 0.7 percent. The S&P 500 Index futures dipped 0.1 percent after the underlying benchmark fell 0.5 percent.

Currencies

The yen rose 0.3 percent to 110.2 per dollar. The offshore yuan traded flat at 6.7360 per dollar. The Bloomberg Dollar Spot Index rose 0.1 percent. The euro bought $1.1257, up 0.1 percent. The British pound was steady at $1.3192.

Bonds

The yield on 10-year Treasuries fell more than one basis point to 2.35 percent, adding to a five-basis point drop in the previous session. Australia’s 10-year bond yield dipped four basis points to 1.73 percent. Japan’s 10-year bond yield dropped to minus 0.1 percent.

Commodities

West Texas Intermediate crude fell 0.5 percent to $59.13 a barrel. Gold rose 0.2 percent to $1,311.74 an ounce.

The post Stocks Slide Again As Bond-Yield Drop Stokes Worry: Markets Wrap appeared first on Investor's Business Daily.

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