(Bloomberg) — The sell-off in global stocks that briefly
looked to have ended mid-week has come back, tipping markets
from the U.S. to Asia into declines exceeding 10 percent from
their January highs. China, where retail investors dominate, got
hit particularly hard Friday.
Equity traders have yet to get comfortable with a jump up
in benchmark U.S. 10-year yields to their highest in four years,
and worries over the unwinding of bets against volatility in
stocks continue to cast a shadow over markets.
Japan’s equity benchmarks were down over 3 percent Friday,
though pared the worst of its losses. South Korea’s index fell
almost 2 percent and Hong Kong’s slid almost 4 percent. Onshore
China gauges at one point exceeded 5 percent losses on the day.
U.S. futures were higher, after fluctuating between gains and
losses, and even as the U.S. government entered a partial
shutdown. Elsewhere, West Texas Intermediate oil fell toward $60
a barrel. China set the yuan lower Friday after it weakend the
most since 2015 yesterday.
In stocks, the negative superlatives have piled up quickly:
the S&P 500 has erased its gain for the year, closed at a two-
month low and is on track for its worst week since 2011. The Dow
plunged more than 1,000 points for the second time in four days.
The MSCI Asia Pacific Index is set for the worst week since at
least February 2016.
Pressure on U.S. stocks again came from the Treasury
market, where another weak auction put gave bond bears
ammunition, sending the 10-year yield as high as 2.88 percent.
Equity investors took the signal to mean interest rates will
push higher, denting earnings and consumer-spending power.
For a market that hadn’t fallen 3 percent from any high in
more than a year, the week’s action was enough to rattle even
the biggest equity bulls. Accustomed to buying the dip, that
wisdom is now in question when more selling by speculators may
be imminent. Over $5 trillion has been wiped from global stock
markets since Jan. 26, according to S&P Dow Jones Indices.
“There’s some big-money players that have really leveraged
to the low rates forever, and they have to unwind those trades,”
said Doug Cote, chief market strategist at Voya Investment
Management. “They could be in full panic mode right now.”
As the equity selling intensified, haven assets grew
attractive. Gold steadied, the yen held gains and even
Treasuries pared the worst of their declines.
Volatility spread across assets. The Cboe Volatility Index
was more than double its level a week ago. The VIX’s bond-market
cousin reached its highest since April. A measure of currency
volatility spiked to levels last seen almost a year ago, with a
plunge in the yuan and a rise in the pound adding to turbulence.
European equities weren’t spared, with the Euro Stoxx 50
volatility gauge spiking toward the highest since June 2016 —
the month of the Brexit vote.
Terminal users can read more in our markets blog.
Here are some events scheduled for the remainder of this
* The Bank of Russia is set to hold a rates decision Friday,
with most economists forecasting a cut.
And these are the main moves in markets:
* The MSCI Asia Pacific Index dropped 2.1 percent as of 2:43
p.m. Tokyo time.
* Topix index fell 2.2 percent.
* Hong Kong’s Hang Seng Index tumbled 3.5 percent.
* Kospi index fell 1.8 percent.
* Australia’s S&P/ASX 200 Index fell 0.9 percent.
* Futures on the S&P 500 Index rose 0.4 percent.
* The Bloomberg Dollar Spot Index dipped 0.1 percent.
* The Japanese yen fell 0.2 percent to 108.96 per dollar.
* The euro increased 0.1 percent to $1.2261.
* The yield on 10-year Treasuries rose one basis point to 2.83
* Japan’s 10-year yield fell one basis point to 0.072 percent.
* West Texas Intermediate crude fell 1 percent to $60.53 a
* Gold fell less than 0.05 percent to $1,318.34 an ounce.
* LME copper fell 0.3 percent to $6,826.00 per metric ton.
Terminal users can read more on this week’s market turmoil
in these Bloomberg stories:
* Map to the Underworld: $2 Trillion of Volatility Trades Here
* How Does the World End? Stock Markets After a Psychological
* Good Is Bad, Bad Is Good and Trump Is Miffed at Stock Traders
* End of a Bull Market, or Nowhere Near? Making the Case for
* Credit Suisse Fund Liquidated, ETFs Halted as Short-Vol Bets