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Shares in Asia weaker as sentiment downbeat on credit views, Brexit

Published 06/12/2016, 11:55 PM
Updated 06/12/2016, 11:57 PM
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Investing.com - Shares in Tokyo dropped sharply and Shanghai was weaker as investors moved cautiously on volatile credit markets and ahead of central bank meetings this week and next week's vote on the U.K.'s continued membership in the European Union.

The Nikkei 225 fell 2.90%, while the Shanghai Composite eased 0.78% after key data.

In China, fixed asset investment in May rose 9.6%, below the 10.5% gain expected year-on-year. As well, industrial production for May seen gained 6.0%, a tad better than the 5.9% seen year-on-year and retail sales jumped 10%, but still below the 10.1% year-on- year expected.

Markets in Australia are shut for a holiday.

Investors will turn their attention to Wednesday’s monetary policy announcement by the Fed for clues on the future direction of U.S. interest rates, as well as monetary policy meetings in Japan, Switzerland and the U.K.

Also ahead, Britain's June 23 referendum on whether to remain in the European Union will weigh on the pound and euro.

Last week, U.S. stocks pared sharp losses on Friday but still closed broadly lower, as domestic crude futures dropped below $50 a barrel and a global bond yield crush spilled over into equity markets worldwide.

Investors continued to pile into safe-haven assets on Friday, as government bond yields throughout the world tumbled to fresh record lows.

The moves come amid mounting fears of a potential collapse in credit markets, as yields on Japanese and Swiss 10-Year government bond yields dropped to their lowest level on record and yields on Japanese 30-Year bonds turned negative.

In Germany, more than 75% of government bond yields hovered in negative territory, as the Germany 10-Year fell to all-time lows of 0.02. Consequently, equities in the euro area plunged 2% as financial stocks dragged down the major indices overall.

The Dow Jones Industrial Average fell 119.85 or 0.67% to 17,865.34, while the S&P 500 Composite index dropped 19.41 or 0.92% to 2,096.07, bouncing from session-lows.

The Dow fell as much as 172 points during Friday's session. On the S&P 500, nine of 10 sectors closed in the red, as stocks in the Energy, Financials and Technology industries lagged. Stocks in the telecommunications sector led, gaining more than 0.6% on the session. The NASDAQ Composite index, meanwhile, lost 64.07 or 1.29% to 4,894.55.

Despite the sell-off over the last two sessions, the major indices are still up more than 10% from February's lows.

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