HONG KONG, March 28, 2019 (BSS/AFP) – Asian markets were gripped by
volatility Thursday as investors grow increasingly worried about the state of
the global economy, sending them rushing to safe-haven assets and fuelling
talk of possible recession.
The pound was managing to hold its own despite another night of drama in
Westminster that saw Prime Minister Theresa May offer to resign if MPs backed
her Brexit plan and lawmakers reject a series of alternative options on
leaving the EU.
After a stellar start to the year, equities are beginning to stumble with
closely watched sovereign bond yields — key indicators of the state of the
economy — flashing a warning.
The yields on government bonds– considered the most watertight investment
in times of turmoil and uncertainty — have tumbled around the world while
central banks are becoming more dovish on their outlooks.
This is most notable in the US, where the Federal Reserve has lowered its
rate hike expectations and 10-year Treasury bond yields are below those of
three-month notes. The last time this happened was before the 2008 global
financial crisis.
“We are worried about the short term because the Fed is as dovish as they
can be in the short term,” Chris Harvey of at Wells Fargo 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.”
After a negative lead from Wall Street, Asia markets fluctuated.
Tokyo ended the morning 1.5 percent lower as exporters were hit by a jump
in the safe-haven yen, while Hong Kong slipped 0.1 percent and Shanghai fell
0.2 percent.
Seoul dropped 0.7 percent and Taipei shed 0.2 percent but Sydney rose 0.2
percent and Singapore was flat as they recovered from early losses. Manila
and Jakarta were also up.
– Day of reckoning –
Against this background, top Chinese and US negotiators were due to kick
off their latest round of trade talks in Beijing Thursday, with hopes the two
economic superpowers can find a deal to end their long-running tariffs row.
And Jeffrey Halley, a senior market analyst at OANDA, warned the meetings
were “taking on ever more importance”.
“An agreement between both parties is the key macro-economic event for
(the first half of) 2019 and will dictate whether we have a slow and low
global pullback or if the day of reckoning arrives much sooner and more
aggressively,” he said in a note.
The two-day meeting is the first since China put into law new measures
seen as an olive branch in their high-stakes stand-off, offering to address
key issues including intellectual property and forced technology transfer.
But while US President Donald Trump has voiced hope he could soon hold a
signing ceremony with Chinese counterpart Xi Jinping, negotiations have
dragged on, leading to worries that substantial differences remain.
On currency markets the pound was essentially flat, having swung back and
forth Wednesday after May’s offer and then the rejection of eight possible
Brexit plans by MPs.
May could now bring her twice-rejected plan back for another vote to avert
a no-deal divorce, which most observers say will be economically calamitous.
However, while some hard-line Brexiteers have indicated support for it —
days before the new deadline for leaving — the Norther Irish DUP remain
steadfast, meaning the premier could still lose.
“May offered to resign… but a sense of uncertainty is growing over what
will happen next,” Mizuho Securities said.
– Key figures around 0230 GMT –
Tokyo – Nikkei 225: DOWN 1.5 percent at 21,049.94 (break)
Hong Kong – Hang Seng: DOWN 0.1 percent at 28,700.48
Shanghai – Composite: DOWN 0.2 percent at 3,017.20
Pound/dollar: DOWN at $1.3183 from $1.3189 at 2100 GMT
Euro/dollar: UP at $1.1249 from $1.1244
Dollar/yen: DOWN at 110.19 yen from 110.51 yen
Oil – West Texas Intermediate: DOWN 31 cents at $59.10 per barrel
Oil – Brent Crude: DOWN 27 cents at $67.56 per barrel
New York – DOW: DOWN 0.1 percent to 25,625.59 (close)
London – FTSE 100: FLAT at 7,194.19 points (close)