The global selloff in riskier assets deepened, spurring the biggest drop in Asian shares since 2013 and sending emerging-market currencies to the weakest levels on record. U.S. 10-year yields dropped below 2 percent.
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. China’s Shanghai Composite Index tumbled 8 percent, while U.S. equity-index futures signaled a fifth straight day of losses. The rand and ringgit both dropped more than 2 percent.
“Things are probably going to get worse before they get better,” Nader Naeimi, head of dynamic asset allocation at AMP Capital Investors Ltd. in Sydney, which oversees about $118 billion, 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 $5 trillion 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 U.S. interest rates.
All major Asian markets were lower after U.S. stocks capped their biggest two-day retreat in almost four years Friday. The MSCI Asia Pacific Index fell for a seventh straight day, sinking 3.5 percent by 11:39 a.m. Tokyo time, set for its lowest close since June 26, 2013.
Greater China equities plunged, with Taiwan’s benchmark gauge dropping the most since 1990 and the Shanghai Composite falling as much as 8.5 percent, close to the biggest intraday retreat since 2007. Hong Kong’s Hang Seng Index fell further into a bear market.
Japan Slide
The biggest five-day retreat for Japanese equities since the aftermath of the March 2011 earthquake, tsunami and nuclear disaster, saw the Topix index close morning trading more than 10 percent below its recent peak. All 33 industry groups on the Topix dropped by at least 1.9 percent Monday.
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. U.S. notes due in a decade paid as little as 1.99 percent, the lowest since April 29.
The Bloomberg Dollar Spot Index, which tracks the U.S. currency against 10 of its most-traded peers, fell 0.3 percent. The yen jumped 1 percent to 120.82 per dollar, the strongest since July 9. The euro advanced 0.9 percent to $1.1488.
Gold was little changed at $1,162.60 after capping its biggest weekly advance since January.
U.S. Retreat
Futures on the Standard & Poor’s 500 Index retreated 2.1 percent after the U.S. benchmark plunged 5.2 percent through the final two days of last week.
Before last week, U.S. 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 U.S. economy is recovering and support from central banks. The benchmark index hadn’t had a decline of more than 5 percent all year.
The Bloomberg Commodity Index fell 1.1 percent, 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 U.S. crude traded at $39.60. Copper lost 1.8 percent.
The rand plunged 2.9 percent to lead commodity-producing nation currencies lower. The Australian dollar dropped 1.4 percent and New Zealand’s currency weakened 1.5 percent.
Malaysia’s ringgit slid 2.1 percent to a fresh 17-year low, while Turkey’s lira retreated 1.4 percent.
