Asian stocks battered by Brexit angst as pound falls, bonds jump (VIDEO)
SINGAPORE, June 14 — Risk aversion prevailed in markets, spurring another day of losses in Asian equities as mounting concern over Britain’s vote on European Union membership fuelled anxiety ahead of two key central-bank meetings this week. The pound fell with oil, while bonds climbed.
As stocks from Australia to Japan slipped, the regional equity index fell a fourth day, extending its longest slump in more than a month. The pound resumed losses as new polls indicated that support for the UK leaving the EU exceeded that for remaining in the bloc.
The yen traded near an almost 3 1/2-year high against the euro and yields on 10-year government debt in Australia and Japan slid to record lows amid demand for haven assets. US oil extended losses below US$49 (RM200) a barrel, while most base metals advanced.
Financial markets have struggled over the past week as investors reassess lackluster global economic signals and concerns mount over the potential fallout from a June 23 referendum that will determine Britain’s future within the EU.
Risk assets have lurched on the outcome of “Brexit” opinion polls over the past two sessions, as traders place increasing importance on the vote. Monetary policy reviews from the Federal Reserve and Bank of Japan this week will also be scrutinised for clues as to the timing of US interest-rate increases and potential expansion of Japan’s record stimulus efforts.
“To survive and thrive as a trader we simply have to adjust to volatility,” Chris Weston, chief market strategist at IG Ltd. in Melbourne, said in an e-mail to clients.
“The key consideration here is what happens if we do actually see a ‘leave’ vote and a sudden shock to markets. What have central banks got in the kitty this time around? The answer, of course, is significantly less than in prior cycles.”
The MSCI Asia Pacific Index fell 0.4 per cent as of 9.26am Tokyo time, extending declines at its lowest level this month. Japan’s Topix index slipped 0.4 per cent, while the Kospi index in Seoul was down 0.1 per cent.
New Zealand’s S&P/NZX 50 Index lost 0.6 per cent as Australia’s S&P/ASX 200 Index returned from yesterday’s holiday to a 1.6 per cent slump, led by energy and technology shares.
Futures on the S&P 500 dropped 0.1 per cent to 2,068.25 after the US benchmark fell 0.8 per cent, bringing its three-day retreat to 1.9 per cent. Mining and technology shares led losses in the US on Monday, even after Microsoft Corp’s deal to buy LinkedIn Corp. for US$26.2 billion sent the social-networking company’s shares up 47 per cent.
US-listed stock of Baidu Inc, China’s biggest Internet search engine, slid more than five per cent in after-market trading as the company cut its sales forecast.
Futures on Hong Kong’s Hang Seng and the Hang Seng China Enterprises gauges were down at least 0.4 per cent in most recent trading.
Data on business confidence and credit-card purchases in Australia is due Tuesday, along with Japanese industrial production and Indian wholesale prices. The Fed starts meeting in Washington ahead of their statement due Wednesday U.S. time, while the BOJ will review policy on Thursday.
Sterling weakened 0.4 per cent to US$1.4213 and lost the same amount in a third day of declines against the euro. Four opinion polls from three separate companies have put the campaign for Britain to leave the EU in front of the ‘Remain’ camp.
The prospect of ‘Brexit’ actually coming to fruition rocked currency markets Monday, with a measure of two-week implied volatility on the pound jumping to a record high.
“Everything is about Brexit right now,” said Richard Falkenhall, a trading strategist at SEB AB in Stockholm. “Speculative accounts have added onto long dollars and long yen positions. At the same time people are adding to shorts in the pound and in the euro. When you watch the polls they’re tighter than they’ve ever been. So there is a lot of uncertainty out there at this point.”
The yen, which typically moves at odds with Japanese shares, was little changed at 106.30 per dollar after touching its strongest level since May 3 last session. Japan’s currency was also steady after five days of gains versus the euro.
The dollar reasserted itself against some higher-yielding currencies, with New Zealand’s dollar falling 0.2 per cent. The Bloomberg Dollar Spot Index, a gauge of the greenback versus 10 major peers, was little changed for a second session. — Bloomberg