Published On: Tue, Feb 6th, 2018

Asian Markets live: Nikkei 225 PLUNGES nearly 1,000 points after mass Wall Street sell off | City & Business | Finance

Japan’s Nikkei share average dived on Tuesday morning to a level not seen since late October after Wall Street plunged overnight on concerns about rising bond yields and potentially rising inflation.

The Nikkei fell to as low as 21,698.52 and was down 4 per cent in the early morning.

The broader Topix fell 4.3 percent to 1,745.79.

Australian shares dropped 2.7 per cent in early trade to their lowest level since October while futures suggest Japan’s Nikkei is on course to fall more than 4 percent.

US stocks plunged in highly volatile trading on Monday, with the Dow industrials falling nearly 1,600 points during the session, its biggest intraday decline in history, as investors grappled with rising bond yields and potentially firming inflation.

Norihiro Fujito, a senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities, said: ”Since last autumn, investors had been betting on the Goldilocks economy – solid economic expansion, improving corporate earnings and stable inflation. But the tide seems to have changed.”

The benchmark S&P 500 fell 4.1 per cent and the Dow 4.6 per cent, suffering their biggest percentage drops since August 2011 as a long-awaited pullback from record highs deepened.

The S&P 500 ended 7.8 per cent down from its record high on January 26.

The trigger was a sharp rise in US bond yields following Friday’s data that showed US wages increasing at the fastest pace since 2009, raising the alarm about higher inflation.

The 10-year US Treasuries yield rose to as high as 2.885 per cent on Monday, its highest in four years and 47 basis points higher than 2.411 per cent at the end of 2017.

The yield did pull back to 2.709 per cent on a continued rout in equity markets.

The CBOE Volatility index, the closely followed measure of expected near-term stock market volatility and often seen as a gauge of investors fear, jumped 20 points to 30.71, its highest level since August 2015.

Mr Fujito said: ”For the last several months, whether it’s stocks or commodities, risk-takers had been the winners. And that’s what hedge funds, which now manage $3.2trillion, have been doing.

“Their leveraged position is now being unwound. And it seems as though there are still some people who haven’t run away (from the sell-off) yet. I would expect more instability.”

European shares also tumbled, with Germany’s Dax hitting a 4-month low.

US junk bonds were sold heavily, with high-yield bonds ETF price hitting a 14-month low.

Keen to avoid risks, investors are closing their positions in other assets, including the currency market where a popular strategy has been to sell the dollar against the euro and other currencies seen as benefiting from higher interest rates in the future.

The euro eased to $1.2379, not far from last week’s low of $1.2335, a break of which could usher in further correction after its rally to a 3-year high of $1.2538 by late last month.

Against the yen, which is often used as a safe-haven currency because of Japan’s solid current account surplus, the dollar slipped to 109.14 yen, having lost one percent on Monday.

Bitcoin also tumbled, hitting a 12-week low of $6,600. That represented a 66 percent fall from its record high of $19,666. It last stood at $6,792.

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