Friday 3.30am BST. Markets across Asia-Pacific were ending the week on a downbeat note, with heightened risk aversion pushing the yield on the benchmark 10-year Japanese government bond further into negative territory.
The yield on Japan’s 10-year government bonds fell to a fresh record low of minus 0.14 per cent, mirroring peers across Europe and the US. Yields, which move inversely to price, hit record lows on Thursday as sovereign bonds rallied as last week’s disappointing US jobs report fuelled worries the health of the global economy.
The looming UK vote on June 23 on whether to leave the EU is also causing concerns. Recent opinion polls have given the Leave camp a small lead, reversing a run that had pointed to victory for the Remain campaign.
In March Japan became the first major economy with a sub-zero borrowing rate for 10-year debt.
Analysts at Goldman Sachs believe the Bank of Japan is likely to hold off on introducing further easing measures at its meeting next week, in part because of the Brexit vote.
“The outcome of the referendum is uncertain but we believe a UK decision to leave the EU could raise the possibility of a major risk-off cycle in global financial markets that could overwhelm the effect of any BoJ easing, if undertaken immediately prior to this,” they said.
The yen was 0.2 per cent weaker at ¥107.26 per US dollar, after edging down 0.1 per cent on Thursday, although the softening failed to offer any support to exporter shares.
Japan’s Nikkei was down 0.6 per cent, on track for a second straight decline, while the broader Topix was off 0.8 per cent. That came as data showed Japanese producer prices remained mired in deflation in May, falling 4.2 per cent year-on-year, the 14th straight month of contraction.
In Hong Kong the Hang Seng was off 0.4 per cent as traders returned from a Thursday break. Markets in China and Taiwan remained closed for public holidays.
The renewed aversion to risk also sapped oil prices, which were on a tear in the first half of the week. Brent crude, the global benchmark, was off 0.1 per cent at $ 51.89 a barrel on Friday while West Texas Intermediate, the US marker, was down 0.2 per cent at $ 50.48.
The retreat weighed on energy stocks, particularly in Australia where the sector was down 1.5 per cent. The S&P/ASX 200 was down 0.9 per cent.
Gold was down 0.1 per cent at $ 1,268.05 an ounce.
The New Zealand dollar strengthened 0.3 per cent to N$ 0.7123 against the US dollar, building on Thursday’s 1.4 per cent advance after the central bank held interest rates steady. That put the Kiwi currency on track for its fourth straight session of gains.
New Zealand’s NZX-50 was flat, even as shares in flag-carrier Air New Zealand rose as much as 3.9 per cent on news it plans to sell the majority of its shareholding in Virgin Australia to Nanshan Group, a privately held Chinese conglomerate.
On Wall Street overnight the benchmark S&P 500 closed down 0.2 per cent while the Nasdaq slipped 0.3 per cent.
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