Friday 03.30 BST
What you need to know
- Trump’s latest threats send Vix to nine-month high in Asia
- Asian equities drop as South Korea’s won falls further
- Havens including gold, yen and government bonds gain
- China soft commodities down after USDA forecasts
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.
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 the worst hit as Seoul’s Kospi index dropped 1.7 per cent, bringing the benchmark down 3.2 per cent for the week so far to an 11-week low. The won dropped half a per cent against the greenback to Won1,147 per dollar, down 2 per cent for the week and the lowest in a month.
In Hong Kong the Hang Seng was down 1.5 per cent, while Sydney’s S&P/ASX 200 index was off 1.2 per cent. The Shanghai Composite index was down 0.9 per cent, while the Shenzhen Composite slid per cent. Traders in Tokyo were on holiday.
Futures contracts for soyabeans and cotton in China were down about 1 per cent, 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 heading lower in Asia on Friday morning after a rough Thursday session. Brent crude, the global benchmark, was down 0.4 per cent at $51.72 a barrel while West Texas Intermediate, the US marker, was 0.3 per cent lower at $48.46.
Gold was hovering near a nine-week high at $1,285.56 per ounce as investors sought a haven in the yellow metal.
Currencies across the Asia Pacific region were losing ground to the greenback, with the Philippine peso matching the won’s fall of 0.5 per cent at 51.048 per dollar, the weakest since 2006.
The renminbi was also down, off 0.4 per cent at Rmb6.6738 per dollar despite China’s central bank setting the currency’s trading band firmer on Friday.
The Australian dollar was down 0.4 per cent at $0.7844 after Malcolm Turnbull, prime minister, said the country would invoke its longstanding military alliance with America should the North Korean regime attack the US.
The yen strengthened to ¥109.06, 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 2.584 per cent, while that on the equivalent New Zealand note was 5bp lower at 2.771 per cent.
Yield on the 10-year South Korean government bond fell 1bp to 2.315 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.
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