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Stocks fall as declining U.S. yields, trade woes knock sentiment

Reuters  |  TOKYO 

By Shinichi Saoshiro

TOKYO (Reuters) - Asian stocks fell on Wednesday, dragged by Wall Street's tumble as sharp declines in long-term yields and resurgent trade concerns stoked investor worries about global economic growth.

Global equities have been shaken as a flattening curve - a result of a steep fall in longer-dated yields - fanned jitters and as U.S.-trade conflict woes resurfaced after a temporary lull.

MSCI's broadest index of shares outside <.MIAPJ0000PUS> was down 0.6 percent.

Australian stocks <.AXJO> lost 1.3 percent after Australia's third quarter growth data fell short of expectations. The Australian dollar was down 0.5 percent at $0.7307.

Japan's Nikkei <.N225> fell 1.15 percent and South Korea's <.KS11> shed 1 percent.

The Dow <.DJI> retreated 3.1 percent and the Nasdaq <.IXIC> sank 3.8 percent on Tuesday. Wall Street's financial shares <.SPSY>, which are particularly sensitive to market swings, dropped 4.4 percent. [.N] futures were up 0.3 percent in Asian trade on Wednesday.

Signals from the Federal Reserve last week that it may be nearing an end to its three-year rate hike cycle has pushed the 10-year to three-month lows below 3 percent.

Concerns about slowing U.S. growth have accelerated the flattening of the curve, a phenomenon in which longer-dated debt yields fall faster than their shorter-dated counterparts.

The spread between the two-year and 10-year Treasury yields was at its flattest level in over a decade.

A flatter curve is seen as an indicator of a recession, with lower longer-dated yields suggesting that the markets see economic weakness ahead.

"The U.S. is likely to be able to withstand another rate hike or two, therefore the flattening of the Treasury curve looks a little over done. That said, it is true that the economic outlook is murkier than before," said Masahiro Ichikawa, at

"There is also Brexit to keep an eye on, and this is a factor in the ongoing risk aversion."

British suffered embarrassing defeats on Tuesday at the start of five days of debate over her plans to leave the that could determine the future of Brexit and the fate of her government.

Risk markets were also weighed down as optimism faded over a truce made over the weekend between U.S. and Chinese

The dollar sagged in the wake of falling Treasury yields, with its index against a basket of six major currencies <.DXY> briefly stooping to a near two-week low of 96.379 overnight before edging back towards 97.00.

The greenback fell against the safe-haven yen, losing 0.75 percent overnight before stabilising at 112.86 yen .

The pound was little changed at $1.2717 having touched a 17-month low of $1.2659, rattled by Brexit setbacks in parliament.

were lower amid fears that demand would stall on the back of the trade war between the and [O/R]

U.S. crude futures were down 0.8 percent at $52.82 per barrel.

(Editing by Sam Holmes)

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

First Published: Wed, December 05 2018. 07:03 IST