World Economy

European, Asian Shares Fall as Selloff Gathers Pace

Major European stock indexes fell as much as 2%.Major European stock indexes fell as much as 2%.

European stocks and bonds fell in a volatile market on Monday, hit by growing concerns that global central banks’ commitment to the post-crisis orthodoxy of super-low interest rates and asset purchase programs may be waning.

German Bund yields rose further above zero to as high as 0.06%, their highest since Britain’s Brexit vote in late June, and the rise in lower-rated eurozone countries’ yields was even sharper, Reuters reported.

Major European stock indexes fell as much as 2%, putting them on course for their biggest losses since June, and Wall Street futures pointed to a fall of 0.7% at the open ESc1.

Selling was driven by revived prospects of the US Federal Reserve hiking rates next week, and concerns that the European Central Bank and the Bank of Japan may be slowing their monetary policy easing efforts.

“It’s a pretty broad-based sell-off on an increasing view that perhaps central banks are going to draw back from providing ever more easing,” said RBC European economist Cathal Kennedy.

“The Bank of Japan and the ECB ... are questioning the effectiveness of their own policy. Add to this an increasing probability that the Fed will raise rates sooner rather than later.”

 In Asia

Earlier, Asian shares suffered their sharpest setback since June as investors were rattled by rising bond yields and talk that US rates might rise as early as next week.

Hong Kong’s benchmark stock index fell more than 3%, its biggest one-day drop in seven months.

The sell-off there also followed reports that the Bank of Japan may look to steepen the Japanese yield curve at a policy review this month, with markets worried that, if it goes down that path, tapering buying of long-dated bonds may be among the options.

The MSCI Asia Pacific Index dropped 1.9% to 138 in Tokyo. Down Under, ASX 200 was down 2.25%, weighed heavily by the energy sector.

The Japanese benchmark index Nikkei 225 shed 1.51%; South Korea’s Kospi fell 1.93% in Asian trade.

Mainland China markets slumped at the open. The Shanghai composite fell 1.73% and the Shenzhen composite shed 1.8%. In Hong Kong, the Hang Seng index slid 2.49%.

The Aussie has lost 2.25% against the yen in two sessions to stand at 76.52, while the Japanese currency was firm on the US dollar at 102.06.

The euro fell marginally against the dollar to $1.1220 after weak German trade data dragged it down on Friday from a high of $1.128. The dollar index, which tracks it against a basket of six currencies, was up marginally to 95.364.