Haven assets continue to gain and volatility measures extend their advance
Friday 07:00 BST
What you need to know
- Asian equities drop sharply and Europe called lower as rhetoric darkens
- South Korea’s won falls further, volatility measures hit notable highs
- Havens including gold, yen and government bonds gain
- China soft commodities down after USDA forecasts
- Brent Crude back under $52
More bellicose rhetoric from US President Donald Trump drove Wall Street’s “fear gauge” to a nine-month high and sent stock markets in Asia lower on Friday, with equities suffering heavy losses as havens including government bonds and gold rallied, while oil prices edged lower. European equities are expected to fall in opening trade.
Mr Trump stepped up his threats against North Korea on Thursday, declaring that he may not have been “tough enough” in his earlier warning to Pyongyang. Those comments sent US stocks lower, with the S&P 500 closing down 1.5 per cent and the Vix index — a measure of volatility — to 16.17 in Asian trade, its highest since last November.South Korean equities were among the worst hit as Seoul’s Kospi index dropped 1.5 per cent, bringing the benchmark down 3 per cent for the week so far to an 11-week low. The won dropped 0.4 per cent against the greenback to Won1,146.02 per dollar, down 1.9 per cent for the week and the lowest in a month.
In Hong Kong the Hang Seng was down 1.9 per cent. Sydney’s S&P/ASX 200 index was off 1.3 per cent. The Shanghai Composite index was down 1.6 per cent, while the Shenzhen Composite slid 1.1 per cent. Traders in Tokyo were on holiday.
European stock benchmarks are expected to fall, with opening calls from CMC Markets pointing to a drop of 40 points for the FTSE 100 and a decline of 81 points for the Xetra Dax 30.
Futures contracts for soyabeans and cotton in China were down about 1.1 per cent, and 1.8 per cent, respectively, snapping an upward streak for the commodities after the US Department of Agriculture crop forecasts came in on the high side. The USDA yield estimates had sent US corn, wheat and soyabean prices lower by 3 to 4 per cent.
Oil prices were falling further in Asia on Friday morning after a rough Thursday session. Brent crude, the global benchmark, was down 0.5 per cent at $51.62 a barrel while West Texas Intermediate, the US marker, was 0.6 per cent lower at $48.29.
Gold was hovering near a nine-week high at $1,286.14 per ounce as investors sought safety in the metal.
Currencies across Asia Pacific were losing ground to the greenback, with the Philippine peso matching the won’s fall of 0.4 per cent at 51.022 per dollar, the weakest since 2006.
The renminbi was also down, off 0.3 per cent at Rmb6.6698 per dollar despite China’s central bank setting the currency’s trading band firmer on Friday.
The Australian dollar was down 0.3 per cent at $0.7849 after Australian Prime Minister Malcolm Turnbull said the country would invoke its longstanding military alliance with America should the North Korean regime attack the US.
The yen strengthened to ¥108.99, an eight-week high against the dollar on the currency’s renewed haven status.
Sovereign bonds in the region were gaining, driving down yields. The yield on the 10-year Australian government bond was down 7 basis points at 2.579 per cent, while that on the equivalent New Zealand note was 5bp lower at 2.77 per cent.
Yield on 10-year US Treasuries was steady at 2.198 per cent after dropping 5bp on Thursday to the lowest in six weeks.
Yield on the 10-year South Korean government bond was flat at 2.308 per cent.
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