MANILA, March 22 — Equities tumbled across Asia after the S&P 500 Index fell the most since Donald Trump’s election, as stocks joined an unwinding of reflation trades amid uncertainty over prospects for the US president’s policies. The yen rose a seventh day as investors sought safety.
Financial and commodity shares led the global selloff as benchmark indexes in Japan and Australia slid the most since early November. The S&P 500 sank more than 1 per cent for the first time since October 11, while a gauge of emerging-market stocks halted an eight-day rally.
A slump in government bond yields continued and the yen reached the highest since November. Gold extended gains while base metals tumbled, with iron-ore headed for a bear market.
Volatility in financial markets is soaring after a period of relative calm as concern is mounting that pro-growth US policies won’t sail through Congress. The Republican plan to repeal and replace Obamacare is drawing strong opposition ahead of a crucial floor vote in the House. Top Republicans warned failure to pass a health-care bill tomorrow could imperil tax and spending refor
“The reality is setting in that markets have expected too much from Trump,” said Jonathan Ravelas, chief market strategist at Manila-based BDO Unibank Inc. “Investors are recalibrating expectations to reflect the reality that Trump’s pro-growth agenda will not happen overnight but will take time and legislation. Markets have also gone up sharply—that allows for a technical correction.”
Equities until now have largely escaped investors’ efforts to unwind so-called Trump trades. While the dollar has been falling steadily since the beginning of the year, dropping more than 4 per cent from a January peak, global stocks have been marching higher. The MSCI All Country World Index reached a record last week while the MSCI Emerging Markets Index closed yesterday at the highest since June 2015.
“I believe markets do need a good reason to take profits, and here it is, “ Margaret Yang, an analyst at CMC Markets in Singapore, wrote in an email. “This is a healthy step back because too much optimism has been priced in and markets have gone too high and too far.”
What’s coming up the rest of this week:
There’s a steady lineup of US Federal Reserve speakers this week, headlined by Janet Yellen on March 23, while central bank policy decisions are expected in New Zealand, the Philippines and Sri Lanka. Earnings are due from companies including Tencent Holdings Ltd March PMI for France is due Friday, along with final fourth-quarter GDP figures.
Here are the main moves in markets:
Stocks
The MSCI Asia Pacific Index dropped 1.5 per cent as of 4:22pm in Tokyo, the most since mid-December. Japan’s Topix lost 2.1 per cent, the biggest loss since Trump’s election. The selloff comes despite data showing Japan’s exports rose the most in two years in February. Australia’s S&P/ASX 200 fell 1.6 per cent, also the most since November. The MSCI Emerging Markets Index dropped for the first time in nine days, down 0.9 per cent. The Hang Seng Index dropped 1.4 per cent, while a measure of Chinese shares traded in Hong Kong lost 2.1 per cent, the most since December 15 after closing at the highest in almost 17 months yesterday. Contracts on the S&P 500 fell 0.3 per cent. The benchmark index tumbled 1.2 per cent to the lowest since February 14 yesterday. Banks sank 2.9 per cent for the steepest slide since June 24, the day after the UK vote to leave the European Union. Futures on the Euro Stoxx 50 Index were down 0.4 per cent.
Currencies
The Bloomberg Dollar Spot Index was flat, following a five-day decline. The yen strengthened 0.2 per cent to 111.46 per dollar, extending its longest winning streak since mid-January. The Australian dollar slipped 0.2 per cent. The British pound rose 0.1 per cent after jumping 1 per cent yesterday as UK inflation accelerated more than forecast to break through the Bank of England’s target for the first time since 2013. The euro was flat after climbing 0.7 per cent in the previous session.
Bonds
The yield on 10-year Treasury notes declined one basis point to 2.41 per cent, after sliding four basis points in each of the past three sessions. Australian 10-year yields dropped five basis points to 2.76 per cent. New Zealand equivalent rates retreated two basis points to 3.20 per cent.
Commodities
West Texas Intermediate oil fell 0.6 per cent to US$47.94 (RM212.11), dropping for a third day as US crude supplies are forecast to climb. Iron ore retreated, with futures for September delivery falling 6 per cent to 579 yuan a metric ton in Dalian. Copper lost 0.5 per cent following a 1.8 per cent drop in the previous session amid signs supplies are returning. Disruptions caused the metal to surge last month to the highest level since 2015. Nickel fell 1.7 per cent. — Bloomberg
