Asian shares selloff, global bond rout stokes anxiety

Asian stock markets continued their losses for the third session due to the increasing tension regarding the US threat to purchase Greenland before President Donald Trump’s Davos speech. The course in global bonds seems to have slowed down for now.

Fears of offshore sales of US assets, dubbed the “Sell America” ​​trade, which emerged in the wake of the “Liberation Day” tariff announcements in April last year, have rattled markets, with Wall Street losing more than two per cent of its value overnight and the US dollar suffering its biggest fall in a month.

This caused investors to flee to the safety of gold and silver, which have both reached record highs.

“The ‘sell America’ trade became the driving force behind major market moves overnight as investors sought to reduce exposure to the US, seen by many as an unreliable partner pursuing self-defeating policies,” said Mantas Vanagas, senior economist at Westpac.

But Trump doubled down on his rhetoric on Greenland, saying there was “no turning back” from his goal of controlling the island, and refused to rule out seizing it by force. The threat of tariffs against Europe has also reignited fears of a global trade war.

The European Union will convene an emergency summit in Brussels on Thursday to discuss the issue, with the long-standing US-EU alliance clearly at risk.

All eyes are now on the World Economic Forum in Davos, where Trump will give a speech on Wednesday.

In early trading, MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.3 percent. Japan’s Nikkei index fell 1.2 percent on Wednesday, falling for the fifth consecutive day.

Nasdaq futures and S&P 500 futures rose 0.2 percent after Wall Street posted its biggest daily drop in three months overnight. S&P 500 lost 2.06 percent and Nasdaq Composite lost 2.4 percent.

EURO STOXX 50 futures and DAX futures fell 0.4 percent.

Caught in a perfect storm of anxiety about exposure to US assets and rising Japanese government bond yields, the global bond market was still reeling from a brutal selloff.

Market concerns about increased government spending under Japanese Prime Minister Sanae Takaichi have caused bond yields to soar to record levels.

Investors were trying to catch their breath in early trading. Giving some relief to the debt market’s frayed nerves, 40-year Japanese government bond yields fell six basis points to 4.145 percent on Wednesday, after rising 26 basis points to a record high of 4.215 percent the day before. Liquidity remains weak in other tenors.

US Treasury bond yields were also flat on Wednesday. The yield on the 10-year benchmark bond fell one basis point to 4.285 percent; It rose seven basis points overnight to 4.313 percent, a five-month high, amid “Sell America” ​​fears.

Danish pension fund AkademikerPension said on Tuesday it would sell US$100 million ($149 million) worth of US Treasury bonds by the end of this month, blaming weak US government finances.

In foreign exchange markets, the US dollar was steady at 98.56 against major currencies, falling 0.5 percent overnight, its biggest daily decline since the beginning of December.

The yen remained steady at 158.19 per dollar but lost a series of transitions, with the Swiss franc reaching a record high of 200.19 yen.

The Bank of Japan will meet on Friday, and although an interest rate hike is not expected this time, policymakers may signal a tightening as soon as April.

Oil prices fell as pressure from geopolitical tensions and an expected increase in US crude inventories outweighed a temporary halt in production at two major fields in Kazakhstan.

West Texas Intermediate crude oil prices fell 1.31 per cent to US$59.57 ($A88.48) per barrel in March.

Gold prices rose 0.8 per cent to US$4,806 (A$A7,138) an ounce, reaching a new record, while silver rose 0.4 per cent to US$95.01 (A$A141.11), just below Tuesday’s record high of US$95.87 (A$A142.39).

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