Hong Kong: Stocks in Asia’s developed markets fell on Friday as a sharp overnight selloff in commodities forced investors to cut positions, though some short-covering before the important US payrolls data may check sharp falls.
The brutal sell-off across metals like silver and copper spilled over into other commodities, triggering a wave of stop-loss selling in stocks, commodity currencies such as the Australian dollar and sent funding currency favorites like the Japanese yen and the US dollar, snap higher.
The Reuters-Jefferies CRB index , a global benchmark for commodities prices, dropped 4.9% on Thursday. It has lost about 8% so far this week, on course for its biggest weekly fall since July 2008.
Australia’s shares fell by 0.3% on Friday, led by miners as a sharp drop in commodity prices raised concerns of lower profits, though a firmer banking sector checked declines.
Shares outside Japan , which have enjoyed an increasing correlation with commodities of late, fell for the fourth consecutive day.
Japanese shares , opening after a three-day break, dropped 1.8% to around 9,825 on concerns that the yen’s sudden surge due to the carry-trade unwinds and a patch of US soft data this week would slow the pace of the broader economic recovery.
“Such hopes were betrayed by poor US jobless claims and the strong yen while we were on holiday,” said Kenichi Hirano, a strategist at Tachibana Securities. “Investors will likely sell on disappointment as they had bought on such optimism on Monday, though the Nikkei may be supported above 9,700.”
Overnight, major US indices closed in the red, with the Dow Jones industrial average closing down more than a% driven by falls in energy and materials shares on the back of the sharp drops in commodity prices.
US crude oil prices extended losses after closing below $100 per barrel for the first time since March.
Silver, which has been a catalyst for the broader commodity market selloff, extended losses after falling 10% on Thursday, its biggest one-day loss since October 2008.
The dollar, a funding currency favorite thanks to the Fed’s ultra easy monetary policy, scored its biggest one-day rise in nearly nine months versus the euro on Thursday as commodities collapsed and the ECB signaled it won’t raise rates in June.
It is expected to hold on to its gains before non-farm payrolls data later in the day.
The sharp wave of risk reduction across markets also boosted bond prices with 10-year US Treasury yields dipping to 3.16% before recovering somewhat. It has fallen more than 40 basis points in less than a month.