Stocks Fall as China Sinks; Japanese Bonds Swing: Markets Wrap - Ester Holdings

Stocks Fall as China Sinks; Japanese Bonds Swing: Markets Wrap

Bloomberg.com — Asian stocks declined with the steepest losses in China as trade worries came back to the fore. Japan’s 10-year bonds swung as the central bank stepped in to temper yield gains following its policy tweaks earlier this week.

China and Hong Kong equity indexes led losses across the region with declines of more than 3 percent, while emerging-market currencies fell with developing nation stocks. Ten-year JGB yields touched 0.145 percent, the highest since February 2017, before paring gains as the Bank of Japan made an unscheduled offer to buy bonds. Treasury yields fell after reaching 3 percent this week for the first time since June as the Federal Reserve unanimously decided to leave rates unchanged while making it clear borrowing costs are headed higher. The offshore yuan edged lower.

Higher U.S. tariffs on Chinese goods look increasingly likely. President Trump asked the U.S. Trade Representative to consider increasing proposed levies on $200 billion in imports to 25 percent from 10 percent, which could be implemented as soon as next month. The move comes just as Washington and Beijing are exploring ways to get back to the negotiating table.

“Markets are now wary of the next step in the trade war between the U.S. and China,” Nick Twidale, chief operating officer at Rakuten Securities Australia, said in a note. “With the U.S. threatening to increase tariffs to 25 percent from 10 percent and the Chinese vowing not to react to ‘blackmail’ to get them back to the negotiating table, this could be the catalyst that tips sentiment and some markets into a tailspin especially as we enter the lower liquidity holiday trading season.”

With the Bank of Japan and Fed now out of the way, focus turns to the Bank of England. Later Thursday, the central bank is expected to raise its key rate by 25 basis points to 0.75 percent, with Bloomberg Economics projecting an 8-1 vote.

Elsewhere, oil steadied around a two-week low after a surprise gain in U.S. crude inventories exacerbated supply concerns. Turkey’s lira hit a record low as the U.S. imposed sanctions on its NATO ally over the imprisonment of an American pastor.

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