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Global Stocks Plunges on Rising Rates



Asian equities
  • Global Stock Plunges on Rising Rates

Equities in Asia declined further, extending the biggest selloff in almost two years as investors continued to adjust to the surged in global bond yields.

Asian equity gauge, MSCI Asia Pacific Index dropped on Monday, heading fo its biggest drop in 14 months. While S&P 500 Index futures pared a drop of 0.9 percent, suggesting Friday’s rout may not extend further.

In Australia, 10-year bond yield surged after Friday’s solid job report showed wage growth is gradually picking up.

“It’s likely the pullback has further to go as investors adjust to more Fed tightening than currently assumed,” said Shane Oliver, Sydney-based global investment strategist at AMP Capital Investors Ltd., which oversees about A$179 billion ($141 billion). “The pullback is likely to be just an overdue correction, with say a 10 percent or so fall, rather than a severe bear market — providing the rise in bond yields is not too abrupt and recession is not imminent in the U.S. with profits continuing to rise.”

The re-pricing of markets has come as investors question whether the Federal Reserve will keep to a gradual pace of monetary tightening, and whether it may need to end up boosting interest rates by more than previously expected in coming years. A higher so-called terminal rate for the Fed’s target implies higher long-term yields — raising borrowing costs across the economy.

Yields on 10-year Treasuries have climbed to a four-year high from 2.40 percent at the start of the year. Last week’s decline for global stocks follows one of the best starts to a year on record amid hopes for ever-expanding corporate profits and growth in the world economy that’s broadening. The MSCI All Country World Index tumbled 3.4 percent last week, its biggest such slide since January 2016.

Elsewhere, oil extended declines after U.S. explorers raised the number of rigs drilling for crude to the most since August. Bitcoin dipped below $8,000.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and, with over a decade experience in the global financial markets.