Japanese stock slide leads global markets lower

Financial markets turned lower once again today after a 5.4 per cent slide in Japan's main stock index and the interest rate on the country's benchmark bond dropped into negative territory for the first time ever.
Stock markets have endured a torrid start to the year as investors have fretted over a number of issues, including the fall in the price of oil to multi-year lows, a slowdown in China and whether many parts of the global economy will fall into recession and suffer a debilitating period of deflation, or falling prices.
Global equities have now lost about USD 6 trillion since the start of the year. In January, that was largely due to worries over the slowdown in China and the slump in the price of oil.

"Now, some commentators are concerned that another banking crisis might be brewing," said Neil MacKinnon, global macro strategist at VTB Capital.
Japan's Nikkei index today led the way lower, ending the day down 5.4 percent at 16,085.44. That fed through into the European session and the expected open on Wall Street.
In Europe, stocks managed to eke out gains on the open before succumbing to another bout of selling. The FTSE 100 index of leading British shares was down 0.8 per cent at 5,642 while Germany's DAX fell 1.6 per cent to 3,978. The CAC-40 in France was 2.1 per cent lower at 3,981.

Wall Street was headed for a lower opening too, with Dow futures and the broader S&P 500 futures down 0.8 per cent.

Perhaps more remarkable than the stock market reverses was the news that the interest rate on the country's benchmark 10-year bond became negative for the first time ever.
The yield on the country's 10-year bond fell 0.05 percentage point to minus 0.03 percent. That means investors are willing to pay for the right to lend money to Japan over that time period.
One reason they might do so is because Japanese bonds are considered safe. By contrast, the equivalent bond rate for the US is 1.75 per cent, also very low in historical terms.

The yields on Japan's bonds have been low for years as the country kept its interest rates at or near zero. Last week, the Bank of Japan cut one of its key rates into negative territory and that's pushed down the yields payable on its bonds.