TOKYO, Dec 5 2018 : Asian stocks fell today, dragged by Wall Street’s tumble as sharp declines in long-term U.S. Treasury yields and resurgent trade concerns stoked investor worries about global economic growth.
Global equities have been shaken as a flattening U.S. Treasury yield curve – a result of a steep fall in longer-dated yields – fanned recession jitters and as U.S.-China trade conflict woes resurfaced after a temporary lull.
MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.6 percent.
Australian stocks lost 1.3 percent after Australia’s third quarter growth data fell short of expectations. The Australian dollar AUD=D4 was down 0.5 percent at $0.7307.
The Dow .DJI retreated 3.1 percent and the Nasdaq .IXIC sank 3.8 percent yesterday. Wall Street’s financial shares, which are particularly sensitive to bond market swings, dropped 4.4 percent. S&P e-mini futures were up 0.3 percent in Asian trade today.
Signals from the Federal Reserve last week that it may be nearing an end to its three-year rate hike cycle has pushed the 10-year U.S. Treasury yield to three-month lows below 3 percent.
Concerns about slowing U.S. growth have accelerated the flattening of the yield curve, a phenomenon in which longer-dated debt yields fall faster than their shorter-dated counterparts.
A flatter curve is seen as an indicator of a recession, with lower longer-dated yields suggesting that the markets see economic weakness ahead.
“The U.S. economy is likely to be able to withstand another rate hike or two, therefore the flattening of the Treasury curve looks a little over done. That said, it is true that the economic outlook is murkier than before,” said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management.
“There is also Brexit to keep an eye on, and this is a factor in the ongoing risk aversion.”
British Prime Minister Theresa May suffered embarrassing defeats yesterday at the start of five days of debate over her plans to leave the European Union that could determine the future of Brexit and the fate of her government.
Risk markets were also weighed down as optimism faded over a truce made over the weekend between U.S. President Donald Trump and Chinese President Xi Jinping.
The dollar sagged in the wake of falling Treasury yields, with its index against a basket of six major currencies briefly stooping to a near two-week low of 96.379 overnight before edging back towards 97.00.
The greenback fell against the safe-haven yen, losing 0.75 percent overnight before stabilizing at 112.86 yen JPY=.
The pound was little changed at $1.2717 GBP=D4 having touched a 17-month low of $1.2659, rattled by Brexit setbacks in parliament.
Crude oil prices were lower amid fears that demand would stall on the back of the trade war between the United States and China.
U.S. crude futures were down 0.8 percent at $52.82 per barrel. – Reuters