A visitor is seen as market prices are reflected in a glass window at the Tokyo Stock Exchange (TSE) in Tokyo, Japan, February 6, 2018. REUTERS/Toru Hanai
Asian share markets were struggling to find their footing on Monday as investors fretted about the risks from looming US inflation data, although early gains on S&P futures offered a sliver of support.
MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS edged up 0.1 percent, having suffered a 7.3 percent drubbing last week. Japan's Nikkei .N225 was closed for a holiday, but Australia's main index shed another 0.4 percent.
E-Mini futures for the S&P 500 ESc1 edged up 0.5 percent, adding to a late bounce on Friday. Yet a relatively sharp 11 tick drop in Treasury bond futures <0#YT:> suggested it was too early to sound an all-clear on volatility.
“A massive buildup in market leverage has been partially unwound in the blink of an eye and morphed into something far more broad-based,” said Chris Weston, chief market strategist at broker IG.
“One could argue that it is the US bond market that is the driving force, and will remain so through this coming week.”
Particularly challenging will be US consumer price data on Wednesday given it was fears of faster inflation, and thus more aggressive rate rises, that triggered the global rout in the first place.
Median forecasts are for consumer price inflation to slow a little to 1.9 percent in January, mainly due to base effects, while the core measure is seen ticking down to 1.7 percent.
A result in-line or lower would likely be a big relief, while anything higher could well spook investors, lift bond yields and batter stocks.
Aziz Sunderji, an economist at Barclays, suspects the inflation scare will prove to be transitory.
“Tight jobs markets will pressure wages upwards, but technology, automation, and globalization are important – and slow moving – forces acting in the opposite direction,” Sunderji argued in a note to clients.
“Paradigms don’t shift on a dime. In our view, the recent market turmoil is a bump in the road, not a wholesale change of direction.”
But what a bump it was. The benchmark S&P 500 .SPX fell 5.2 percent last week, its biggest decline since January 2016. Ninety-six S&P 500 stocks were down 20 percent or more from their own one-year highs, according to Thomson Reuters data.
In Asia, Hong Kong's high-flying shares .HSI shed almost 10 percent for the week, while Japan .N225 lost 8.1 percent and South Korea .KS11 6.4 percent.
The pivotal gauge of S&P 500 volatility, the VIX .VIX, remained relatively elevated at 29 percent.
Yields on US 10-year Treasury paper US10YT=RR touched a four-year top of 2.885 percent, moving ever further above the S&P 500’s dividend yield of 2.34 percent.
The ascent of yields offered some support to the US dollar, which gained 1.4 percent on a basket of currencies last week to currently stand at 90.395 .DXY.
The euro lost 1.8 percent for the week and was last changing hands at $1.2247 EUR=.
Carry currencies, including the Australian dollar, and many emerging market currencies were also casualties of the rush from risk, which in turn benefited safe harbours such as the Japanese yen and Swiss franc.
The dollar was hovering at 108.85 yen JPY=, having fallen 1.3 percent last week.
The mostly firmer dollar and worries about rising global interest rates hindered gold XAU=, which was stuck at $1,315.65 an ounce and just above a five-week low of $1,306.81.
Oil prices had also had a rough ride, with Brent down nearly 9 percent last week while US crude dropped 10 percent, the steepest weekly declines since January 2016.
Early Monday, Brent crude futures LCOc1 were up 9 cents at $62.88 a barrel, while US crude for April CLc1 added 19 cents to $59.39.