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Wellington - Equity investors took flight across Asia, sending the region’s benchmark stock gauge toward a bear market and Chinese stocks plunging by the most since 2007 as US futures tumbled.
Ten-year Treasury yields dropped below 2%.
China’s Shanghai Composite Index tumbled as much as 9%, while US equity-index futures signaled a fifth straight day of losses.
Commodity prices sank to a 16-year low, while credit risk in Asia increased to the highest since March 2014. The yen rallied and government bonds rose as investors sought haven assets. Rand dropped 2.7%.
“Things are probably going to get worse before they get better,” Nader Naeimi, head of dynamic asset allocation at AMP Capital Investors in Sydney, which oversees about $118bn, said by phone.
“You really need rate cuts and more policy easing in China. In the meantime, things can get worse. We’ve got to see more clarity around the Fed.”
More than $5trn has been erased from the value of global stocks since China unexpectedly devalued the yuan, fueling speculation that the slowdown in the world’s second- largest economy may be deeper than previously thought.
The rout is shaking confidence that the global economy will be strong enough to withstand higher US interest rates, even as bets on a September liftoff evaporate.
All major Asian markets dropped and futures on the Standard & Poor’s 500 Index retreated as much as 3.1% after the US benchmark plunged 5.2% through the final two days of last week.
The MSCI Asia Pacific Index fell for a seventh straight day, sinking 4.9% by 08:33, set for its lowest close since June 25, 2013. The gauge has fallen more than 20% from an April high.
Hang Seng
Greater China equities plummeted, with Taiwan’s benchmark gauge dropping the most since 1990 and the Shanghai Composite - whose members are restricted from falling more than 10% per day - at one point heading for its biggest one-day retreat since 1996.
Hong Kong’s Hang Seng Index fell 5.4%, tumbling further into a bear market.
The measure is about 25% below an April high, with a gauge of price momentum falling to the lowest since the October 1987 stock-market crash.
The biggest five-day retreat for Japanese equities since the aftermath of the March 2011 earthquake, tsunami and nuclear disaster, saw the Topix index take losses since an August 10 high to more than 12%.
All 33 industry groups on the Topix dropped by at least 3.6% on Monday.
South Korea’s Kospi index slid 2.7%, dragged lower by Samsung Electronics, which plunged as much as 6.2%, the biggest drop since June 2013. Technology companies were the second-biggest drag on the Asia-Pacific gauge Monday.
Yen, euro
The yen advanced with the euro as Treasuries rallied amid speculation the global selloff will forestall the Federal Reserve’s first interest-rate increase since 2006.
US notes due in a decade paid as little as 1.99%, the lowest since April 29.
The Bloomberg Dollar Spot Index, which tracks the US currency against 10 of its most-traded peers, fell 0.2%. The yen jumped 0.8% to ¥121.06/$, the strongest since July 9. The euro advanced 0.6% to $1.1452.
Gold was little changed at $1 157.80 after capping its biggest weekly advance since January.
Nasdaq 100 Index futures plunged 4%, while contracts on the Dow Jones Industrial Average retreated as much as 3.1%.
Fed funds futures now show a probability of a December rate increase at 55% versus 61.1% on Friday. Bets on liftoff in September fell to 28%, down from 34%.
Before last week, US stocks had held their ground throughout 2015.
The S&P 500 had stayed within a range roughly tracking its 50-, 100- and 200-day moving averages, boosted by signs the US economy is recovering and support from central banks. The benchmark index hadn’t had a decline of more than 5% all year.
Commodities retreat
The Bloomberg Commodity Index fell 1.5%, heading for the lowest closing level since 1999. Brent crude slipped below $45 a barrel for the first time since March 2009, while a barrel of US crude traded at $39.37. Copper lost 2.5%.
The rand led commodity-producing nation currencies lower. The Australian dollar dropped 1.2% and New Zealand’s currency weakened 1.4%.
Malaysia’s ringgit slid 1.5% to a fresh 17-year low, while Turkey’s lira retreated 1.4%. A deadline for Turkey to form a coalition government passed, putting the country on course for its second parliamentary election this year and adding to a global selloff.
