Asian markets fall to six-month lows

The US dollar slipped against the yen after the Bank of Japan (BOJ) held off from taking fresh steps to curb bond market volatility, while Asian shares sagged to a fresh 2013 low as China growth worries and continued uncertainty over the US bond-buying programme depressed sentiment.

The Bank of Japan kept monetary policy steady and held off on taking further steps to curb any future spike in bond yields on Tuesday, judging that the recent market turbulence has yet to pose severe damage to the economy’s recovery prospects.

The decision nudged up the yen against the dollar and weighed on Japanese equities as investors, who had expected fresh steps from the BOJ to stem bond market volatility, recalibrated their trading positions.

The Nikkei average fell 0.7 per cent, and the dollar declined 0.4 per cent against the yen to 98.33 yen.

Japanese government bond yields had spiked recently and were hit by volatile trading after the BOJ launched its radical stimulus measures on April 4th.

The Nikkei has also had a torrid time over the past couple of weeks. It soared 4.9 per cent in its best day since March 2011 the previous session, after briefly entering bear market territory on Friday. The index hit a 5-1/2 year high last month.

Hideo Kumano, chief economist at Dai-ichi Life Research Institute in Tokyo, said BOJ chief Haruhiko Kuroda “may also have thought there’s no need to be too nervous about the market volatility, hoping to determine more the effect of the BOJ’s bond-buying programme for the time being.”

MSCI’s broadest index of Asia-Pacific shares outside Japan shed 0.9 per cent to a fresh 6-1/2-month low for a fifth straight day of declines, which would mark its longest losing streak in nearly three months.

Fed stimulus concerns

Solid US jobs data and the raising of the rating outlook of the US to stable from negative by Standard & Poor’s on the back of an improved economy kept alive speculation about an eventual softening of the Fed’s strong commitment to quantitative easing even as few saw any imminent policy shift.

Global equity and commodity markets have been jolted recently by the Fed stimulus concerns, slowing growth in China, a deep slump in Europe and turbulence in Japanese stocks and bonds.

Gary Yau, strategist at Credit Agricole, said in a note to clients that markets overall were hampered by “lingering uncertainties.”

Elsewhere, Australian shares bucked the trend to inch up 0.1 per cent, resuming trading from a holiday on Monday, while South Korean shares tumbled 1 per cent and Hong Kong slid 1.1 per cent. Chinese markets remain closed for a holiday.

US crude futures inched up 0.1 per cent to $95.84 a barrel and Brent eased 0.1 per cent to $103.82.

Spot gold was down 0.2 per cent at $1,383.91 an ounce, as the S&P’s move on the US credit outlook hurt bullion’s safe-haven appeal.

European stocks fell and Wall Street ended nearly flat, as investors reassessed equity valuations after US stocks hit record highs and European shares marked multi-year peaks recently, making current levels less attractive than earlier this year and raising doubts about a sustained rally from here.

Reuters