Equity Market: Asia Weakens on Economy Risks

Equity Market – The Asian equity market experienced a weaker market movement on Friday due to growing risks of unsettled US-China trade differences, stunting sentiment and fanning fears of a global economic slowdown.

Government bonds, which are generally sought-after by investors due to their safe-haven nature, benefitted from investor jitters. German and Japanese debt yields hit a two-year low.

Spread-betters expect stocks in Europe to start trading in a mixed tone. Britain’s FTSE is expected to start trading just 0.1 percent higher, while Germany’s DAX is seen easing back 0.05 percent. France’s CAC is expected to be unmoved.

MSCI’s broadest Asia-Pacific share index ex-Japan lost 0.5 percent, retreating from a four-month peak hit during the previous day. On the week, the index was down 0.1 percent.

In Hong Kong, Hang Seng slipped 0.25 percent. In South Korea, KOSPI eased 1.1 percent lower. In Japan, the Nikkei 225 sank 2 percent.

The fears of a global economic slowdown further intensified after the European Commission revised down its eurozone growth forecasts for 2019 and 2020, with European businesses and investors trying to clear the blurry economic outlook with trade friction.

Further, investors were further spooked after US President Donald Trump stated that he did not plan to meet with Chinese President Xi Jinping before the March 1 deadline to trade negotiations between the US and China, which are the world’s top two economic powerhouses.

“Investors are getting nervous as the market had been optimistic about a resolution for the trade dispute since the beginning for the year,” said a forex and equity strategist at the Bank of America Merrill Lynch.

Jitters in the Equity Market

Trump’s statements further stoked fears over the months-long trade negotiations between the US and China. As evidence, the US equity market indexes’ shares declined overnight. The Dow lost 0.9 percent to pull back from a two-month peak touched midweek on upbeat corporate results.

“With many of the corporate earnings out of the way, equities appeared ready for a correction after their recent highs,” said a senior strategist. “Equities will face further hurdles next week, as (US Treasury Secretary Steven Mnuchin and Trade Representative Robert) Lighthizer will be visiting China. Brexit talks are also in focus.”

Mnuchin and Lighthizer will be starting another round of trade talks in Beijing next week to push for a deal to protect American intellectual property and avert a March 2 increase in US tariffs on Chinese goods.

Overnight, the 10-year US Treasury yield extended its losses to 2.643 percent, a one-week trough. In Japan, the 20-year government bond yield was at 0.400 percent, a 27-month rock bottom.

In Germany, 10-year bond yields slipped to 0.105 percent, which is its lowest since November 2016. This followed the European Commission’s huge revision of growth and inflation estimates.