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Seeping Wall Street angst damps Asia markets

Wednesday 03:10 BST

Overview

Uncertainty on Wall Street seeped into Asian trading as the region’s sovereign bonds gained across the board and energy equities were battered by a drop in oil prices.

Hot topic

Sovereign bonds caught a bid with stock markets across the region downbeat. Equities traders were taking cues from a disappointing session on Wall Street, where the S&P 500 slid 0.3 per cent as energy stocks were undercut by a downturn in oil prices.

The focus in the foreign exchange market was on the UK pound, which was hovering at its highest intraday levels against the US dollar since October, after Prime Minister Theresa May called a snap election for June 8.

Equities

In Sydney, the S&P/ASX 200 was off 0.4 per cent, led lower by a 1.4 per cent drop in the real estate segment. Australian gambling group Tatts rose as much as 1.7 per cent after a consortium backed by US private equity group KKR made a sweetened $4.7bn cash offer for the company, posing a potential spoiler to a planned merger with rival Tabcorp Holdings.

Energy stocks were suffering in Tokyo as well, down 1.1 per cent and offsetting gains in the healthcare segment to leave the broader Topix index flat. Inpex was down 0.9 per cent while Japan Petroleum Exploration shed 1.2 per cent.

Hong Kong’s Hang Seng Index dropped 0.6 per cent, pulled lower by a 1.5 per cent drop in the energy sector. The decline took the benchmark index further below the psychological threshold of 24,000 points — a level it has repeatedly surmounted and then fallen back through over the past decade.

Mainland Chinese bourses were also negative, with the Shanghai Composite dropping 0.6 per cent and the Shenzhen Composite index falling 0.8 per cent.

Forex

The UK pound was holding at $1.2842 after climbing 2.7 per cent to a five-month high of $1.2905 on Tuesday on news of the UK snap general election, as investors bet the prime minister would use the vote to help deliver a soft Brexit.

The dollar index was up 0.1 per cent in Asia at 99.556.

The yen weakened 0.1 per cent to ¥108.49 per dollar, but the Japanese currency has climbed 7.2 per cent so far this year.

The Australian dollar was down 0.3 per cent against its US counterpart at $0.7531, a new low for the week.

Fixed income

Uncertainty proved a boon for major government bonds in the Asia Pacific region, which were gaining across the board.

The yield on Japan’s benchmark 10-year government bond fell below zero for the first time since mid-November, while that on the March 2027 JGB fell as much as 9 basis points to minus 0.004 per cent. Yields move inversely to prices.

The 10-year Australian government bond yield was down 3 bps at 2.453 per cent, as was that for the 10-year South Korean note, at 2.134 per cent.

However, US Treasuries were paring sharp gains made in Tuesday’s session, with the yield on the 10-year note up 1 bp at 2.181 per cent after dropping 8 bps the session prior.

Commodities

Oil prices were steadying after a choppy US session that saw Brent crude, the international marker, drop 0.9 per cent.

Brent was off 0.1 per cent at $54.84 a barrel in Asia while US marker West Texas Intermediate was down by the same amount, at $52.36.

Gold was edging lower, falling 0.1 per cent to $1,287.85 an ounce.

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