Asian Shares Extend Selloff Amid Global Bond Rout Fears

SYDNEY (Jan 21): Asian stocks extended their losses for a third session on Wednesday, undone by heightened tensions over US threats to acquire Greenland ahead of President Donald Trump's Davos speech, while a global bond rout appeared to slow for now. Fears of offshore selling of US assets — the so-called "Sell America" trade that emerged after last year's "Liberation Day" tariff announcements in April — gripped markets as Wall Street tumbled over 2% overnight and the US dollar suffered its biggest fall in over a month. That sent investors fleeing to the safety of gold and silver, which both notched record highs. "The 'sell America' trade was the driving force behind major market moves overnight, as investors looked to reduce exposure to the U.S., seen by many as an unreliable partner pursuing self-defeating policies," said Mantas Vanagas, a senior economist at Westpac. Trump, however, doubled down on his rhetoric over Greenland, saying there was "no going back" on his goal to control the island, refusing to rule out taking it by force. His threat of tariffs on Europe has also rekindled fears of a global trade war. The European Union will convene an emergency summit in Brussels on Thursday to discuss the matter, with the long-standing U.S.-EU alliance clearly at risk. All eyes are now on the World Economic Forum in Davos where Trump is due to deliver a speech on Wednesday. In early trade, MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.3%. Japan's Nikkei slumped 1.2%, down for the fifth straight day. Nasdaq futures and S&P 500 futures advanced 0.2% after Wall Street suffered the biggest daily drop in three months overnight. The S&P 500 lost 2.06% while the Nasdaq Composite tumbled 2.4%. Both EURO STOXX 50 futures and DAX futures fell 0.4%. Japan's bond rout pauses for now The global bond market was still reeling from a brutal selloff, having been caught up in a perfect storm of worries over exposure to US assets and a surge in Japanese government bond yields. Market worries over increased government spending under Japanese Prime Minister Sanae Takaichi sent bond yields there skyrocketing to record highs. Investors were trying to catch their breath in early trading. Providing some relief to frayed debt market nerves, the 40-year Japanese government bond yields retreated six basis points (bps) on Wednesday to 4.145% after surging 26 bps a day earlier to a record high of 4.215%. Liquidity in other tenors remains thin. US Treasury yields were also steady on Wednesday. The benchmark 10-year yield slipped one bp to 4.285%, having jumped seven bps overnight to a five-month high of 4.313% amid the "Sell America" fears. Danish pension fund AkademikerPension said on Tuesday it would sell off its holding of US Treasuries, worth some US$100 million (RM405.60 million), by the end of this month, blaming weak US government finances. In the currency markets, the US dollar held steady at 98.56 against its major peers, having dropped 0.5% overnight — the biggest daily fall since early December. The yen was steady at 158.19 per dollar, but lost out on a number of crosses, with the Swiss franc hitting a record high of ¥200.19. The Bank of Japan meets on Friday and though no rate hike is expected this time, policymakers could flag a tightening as soon as April. Oil prices fell as pressure from geopolitical tensions and an expected build-up in US crude inventories outweighed a temporary halt in output at two large fields in Kazakhstan. Gold prices rose 0.8% to US$4,806 an ounce, a new record high, while silver climbed 0.4% to US$95.01, just short of a record top of US$95.87 hit on Tuesday.