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Sydney - Global stocks slumped and the yen strengthened along with Treasuries amid increasing caution about geopolitical risks and the path of US interest rates.
Chinese equities traded in Hong Kong fell to a one-month low while Japan’s Topix slipped as the yen gained. Shares in Seoul extended the longest losing streak since June as tensions over both Syria and North Korea remain in focus.
US bond yields added to declines after Federal Reserve chair Janet Yellen confirmed that the central bank has shifted its focus to sustaining economic gains from post-crisis healing. Oil retreated after a five-day rally, its longest stretch this year.
The White House press secretary warned Syria to stop using barrel bombs against civilians, suggesting President Donald Trump may expand the criteria for action against Bashar al-Assad’s regime after last week’s missile attack on a Syrian airbase.
South Korean assets have sold off amid speculation the US could make a similarly aggressive pivot when it comes to Pyongyang.
Investors are also speculating on the path for interest rates, after Friday’s weaker-than-expected US jobs report. The Fed is aiming to ease back significantly this year on the level of support the central bank is providing the US economy as they close in on their goals of full employment and 2% inflation.
“Before, we had to press down on the gas pedal trying to give the economy all of the oomph that we possibly could,” Yellen said on Monday in Ann Arbor, Michigan. The Fed is now trying to “give it some gas, but not so much that we’re pushing down hard on the accelerator.”
What investors are watching:
US Secretary of State Rex Tillerson will visit Moscow this week in an effort to persuade Russia that its alliance with Assad is no longer in its strategic interest. He will also press the country to uphold an agreement it brokered during the Obama administration to remove all chemical weapons from Syria.
Federal Reserve Bank of Minneapolis President Neel Kashkari will participate in a Q&A at a meeting of the Minnesota Business Partnership. The G-7 foreign ministers hold a news conference after a two-day meeting in Lucca, Italy.
Here are the main moves in markets:
Currencies
The yen gained 0.4% to ¥110.53/$ as of 09:12, strengthening for a second day. The Bloomberg Dollar Spot Index was little changed. The South Korean won dropped 0.3%, extending a six-day loss to 2.7%. The euro slipped 0.1% to $1.0588. The rand climbed 0.2%.
Stocks
The MSCI All-Country World Index fell 0.1%. Volumes in many markets are down in a week that’s shortened in many countries by Easter holidays. The Stoxx Europe 600 Index dropped 0.1%, after a four-day rally to the highest since December 2015. Japan’s Topix fell 0.3%, after a two-day advance.
Australia’s S&P/ASX 200 gained 0.3% as energy shares advanced. South Korea’s Kospi fell 0.4%, extending a selloff to a sixth straight sessions. The measure has lost 2% during that period. Hong Kong’s Hang Seng lost 0.8% and the Hang Seng China Enterprises Index slid 1.2% amid concern China may ramp up oversight of financial markets.
The gauge of Chinese shares traded in Hong Kong has dropped 4.8% from a 17-month high reached last month. The Shanghai Composite Index rose 0.6%. Futures on the S&P 500 Index declined 0.1%. The benchmark gauge climbed less than 0.1% on Monday, while the CBOE Volatility Index, or VIX, rose to the highest level this year.
Bonds
Treasuries rallied, with the yield on the 10-year note dropping four basis points to 2.33% after a two basis point decline on Monday. Australian 10-year yields fell four basis points to 2.53%
Commodities
Oil fell 0.2% to $52.98 after jumping 1.6% on Monday. West Texas Intermediate crude gained 5.7% over the past five sessions. Gold rose for a third day, adding 0.2% to $1 257.22 an ounce. Iron ore futures climbed 1.4% in China after dropping 7.1% in the previous two sessions. The commodity fell into a bear market on Friday.
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