SYDNEY – Asian shares reversed their earlier gains on Wednesday as investors dumped U.S. stock futures for safer harbors, a sign market participants remain jittery after this week’s global markets rout.
While most analysts believed this week’s distressed selling looks to have run its course for the moment, allowing volatility to abate a little, the prospect of monetary tightening across the globe remains a challenge for the long term.
“If we look at some of the drivers of the recent volatility – the natural correction and the bond sell-off – we don’t foresee any of these factors contributing to a lengthy period of extreme volatility,” said Tom Kenny, senior economist at ANZ.
“The correction is probably a healthy development and is not reflective of a souring of the macroeconomic outlook.”
Investors took their cues from a late rebound on Wall Street overnight, though many had an anxious eye on E-Mini futures for the S&P 500 which slipped about 1 percent in late Asian trading. Dow Minis were down 0.9 percent.
MSCI’s broadest index of Asia-Pacific shares outside Japan was a tad softer, having risen as much as 2 percent in early trade.
Japan’s Nikkei eased too but was still up 0.2 percent. Chinese blue chips and South Korea’s KOSPI index dropped more than 2 percent.
Hong Kong, Singapore and Indian stock markets were also in the red.
“The only surprise about the current volatility is that it hasn’t happened sooner. Normally, even in a bull market, investors should expect a sell-off of 10-percent-plus at some point,” said Richard Titherington, chief investment officer of EM Asia Pacific Equities at J.P. Morgan Asset Management.
“While a major market downturn is possible, it is not our current expectation. The underlying backdrop of an improving global economy, a weakening U.S. dollar and a pickup in global earnings all remain supportive factors.”
Bonds had started to see some buying again, a hint that risk appetite might be waning, which could trigger another spasm of stock selling.
U.S. 10-year yields nudged lower to 2.76 percent, after going as high as 2.80 percent earlier in the day. – Reuters