Asian markets on Monday get their first chance to react to the extraordinary market moves on Friday that saw stocks and bond yields tumble, and volatility and rate cut expectations soar following an unexpectedly soft U.S. employment report.
That ‘risk off’ sentiment and momentum is sure to spill over into Asia, which was already wobbling last week after the Bank of Japan‘s hawkish policy tilt, yet more sluggish Chinese economic data and some weak U.S. tech earnings.
The MSCI Asia ex-Japan stock index slumped 2.5% on Friday, its biggest fall in over two years, and Japan’s Nikkei 225 index tanked 5.8% for its biggest fall since March 2020. Japan’s broader Topix’s 6.1% slide marked its worst day since 2016.
Given Friday’s U.S. payrolls-fueled selling on Wall Street, a sharp selloff in Asia early Monday is likely. Friday’s market gyrations may prove to be excessive, but they are worth noting.
The two-year U.S. Treasury yield plunged 30 basis points, its steepest one-day fall since the U.S. regional banking shock of March last year. Its weekly fall of 50 bps is in line with those seen in the COVID-19, Lehman, 9/11 and Black Monday crises.
