Asian markets were gripped by volatility yesterday as investors grow increasingly worried about the state of the global economy, sending them rushing to safe-haven assets and fuelling talk of possible recession.
The pound was managing to hold its own despite another night of drama in Westminster that saw Prime Minister Theresa May offer to resign if MPs backed her Brexit plan and lawmakers reject a series of alternative options on leaving the European Union.
After a stellar start to the year, equities are beginning to stumble with closely watched sovereign bond yields flashing a warning.
The yields on government bonds ‒ considered the most watertight investment in times of turmoil and uncertainty ‒ have tumbled around the world while central banks are becoming more dovish on their outlooks.
This is most notable in the United States, where the Federal Reserve has lowered its rate hike expectations and 10-year Treasury bond yields are below those of three-month notes. The last time this happened was before the 2008 global financial crisis.
After a negative lead from Wall Street, Asia markets fluctuated.
Tokyo sank 1.6 per cent as exporters were hit by a jump in the safe-haven yen, while Shanghai shed almost one per cent.
Seoul dropped 0.8 per cent and Taipei eased 0.1 per cent, but Hong Kong gained 0.2 per cent and Sydney rose 0.7 per cent as they recovered from initial selling.
Singapore was up 0.3 per cent, while Manila and Jakarta were also in positive territory.
Against this background, top Chinese and US negotiators held their latest round of trade talks in Beijing Thursday, with hopes the two economic superpowers can find a deal to end their long-running tariffs row.
On Thursday, China's commerce ministry spokesman Gao Feng said at a weekly news briefing there was “still a large amount of work remaining to finish”, adding that both sides are "going all out to earnestly negotiate".
The pound dropped yesterday, weighed down by ongoing chaos in Brexit proceedings, dealers said.
London's stock market rose, however, buoyed by the weaker currency, while eurozone equity markets also enjoyed modest gains.
British Prime Minister Theresa May will renew attempts to push through her Brexit plan, one day after she dramatically offered to quit to save her deal and MPs failed in their own bid to break the deadlock.
In early trade, London rose 0.4 per cent, while Paris and Frankfurt were flat.
Wall Street started higher, defying economic worries that were further stoked Thursday when the US government revised growth down by a sizeable 0.4 percentage points to 2.2 percent for the final quarter of 2018.