Japanese stocks, US bond yields fall on growth concerns

Wednesday, 15 October 2014 00:00 - - {{hitsCtrl.values.hits}}

Global growth concerns hit Japan stocks, oil prices
Asian shares rebound from 6 1/2-month low on bargain-hunting
Investors nervous ahead of end of Fed’s QE3

TOKYO (Reuters): Japanese stocks skidded to two-month lows on Tuesday as heightened concerns about the health of the world economy unnerved investors, triggering a shift in funds to safe havens such as U.S. bonds. Japan’s Nikkei share average fell 2.4%, hitting levels last seen in mid-August, while rising bond prices drove the 10-year U.S. debt yield to a 16-month low of 2.238%, both in the week’s first trade following a market holiday on Monday. European shares look set to follow suit, with Germany’s DAX and France’s CAC 40, both already at this year’s low, seen falling as much as 0.5%. Britain’s FTSE is expected to fall 0.4%. Asian shares had better luck, as MSCI’s broadest index of Asia-Pacific shares outside Japan managed to nudge up 0.6% thanks to bargain-hunting though the rise came only after a fall of more than 10% since early September. “There are downside risks to the global economy on the whole. And the G20 meeting last weekend showed there is no panacea to lift the economy,” said Hirokazu Kabeya, senior strategist at Daiwa Securities. The spectre of a possible recession in Europe, a slowdown in China and sluggish growth in Japan have prompted investors to pull some of their money out of equities ahead of the earnings seasons in the U.S. and elsewhere. The U.S. Federal Reserve is expected to wind up its bond buying scheme later this month - another reason for investors to be cautious on stocks as the completion of the Fed’s two previous quantitative easing programmes triggered a major correction in Wall Street shares. U.S. S&P 500 was traded on Monday, and fell 1.7% to a five-month low, its worst three-day slide since November 2011. The volatility index rose to 24.6%, the highest level since June 2012, when the world’s financial markets were rattled by the European sovereign debt crisis, encouraging investors to flock to the safety of government debt. “The fall in U.S. bond yields reflects a worsening global economic outlook, notably in Germany. But considering that the Fed is still planning to raise interest rates in the future, bond yields can yield only so much,” said Tomoaki Shishido, fixed income strategist at Nomura Securities. After a run of weak data from Germany, investors are now braced for the ZEW economic sentiment index later in the day, which is expected to fall to a two-year low. The U.S. dollar stumbled after a months-long rally as concerns over the global growth outlook undermined the case for an earlier start to the Fed’s rate-tightening cycle. Fed Vice Chairman Stanley Fischer said on Saturday that the global outlook might hamper the effort to normalize U.S. monetary policy after years of extraordinary stimulus. The dollar moved little on Tuesday with the dollar index standing at 85.347 , off a four-year high of 86.746 hit earlier this month. The euro traded at $1.2716 while the yen stood at 107.10 per dollar.

Gold retreats from 4-week high as dollar firms

LONDON (Reuters): Gold retreated from four-week highs on Tuesday as lacklustre euro zone data pressured the euro versus the dollar, though the metal was underpinned by fears over global growth, which hurt stocks and other commodities. Deepening worries over the health of the global economy dragged shares in Europe and Japan lower on Tuesday, while figures showing a slump in oil demand growth knocked Brent crude futures to below $88 a barrel. Spot gold was down 0.3% at $1,232.90 an ounce at 0951 GMT, after reaching a four-week high on Monday. US gold futures for December delivery were up $3 an ounce at $1,233.00. The euro slid against the dollar after an index of German analyst and investor morale fell below zero for the first time in nearly two years, suggesting Europe’s largest economy is reeling from crises abroad and a weak euro zone. “What we saw last week was that the dollar hit its strongest level to the euro in a couple of years, when gold fell to its lowest price since December 2013,” Thorsten Proettel, a commodity analyst at LBBW, said. “The U.S. dollar to euro rate is a very strong argument for gold or against gold.” Gold, priced in dollars, becomes more expensive for holders of other currencies when the U.S. unit strengthens. The dollar index, a measure of its strength against a basket of other currencies, rose 0.2%. While the dollar was recovering some of the ground lost on Monday, stock markets continued to retreat on Tuesday, underpinning the metal.