Markets started the week gripped by a fresh bout of risk aversion, as Asian stocks slipped with energy-linked currencies amid further hemorrhaging in crude oil prices. Demand for haven assets supported government debt and gold.
Japan's Nikkei 225 Stock Average was on the cusp of a bear market as Chinese shares fluctuated. Sovereign bonds in the region climbed, and the cost of protecting against corporate defaults in Australia rose to a three-year high.
Brent crude dipped below $28 a barrel, with Nomura Holdings Inc. predicting a potential drop to $25 on Monday as Iran pledged to immediately boost exports following the lifting of sanctions.
The yuan jumped in Hong Kong as the People's Bank of China boosted the currency's reference rate by the most since Dec. 21, fueling a rebound in Australia's dollar. Malaysia's ringgit retreated.
"Worries about China, the Fed and global growth are likely to drive continued share market weakness and volatility in the short term," Shane Oliver, head of investment strategy in Sydney at AMP Capital Investors Ltd., which oversees about $115 billion, said by e-mail. "Expect volatility to remain high."
Iran said it's targeting an increase in shipments of 500,000 barrels a day amid the removal of sanctions capping crude sales, a move that would likely worsen a global glut that has spurred a 38 percent slide in oil over the past year.
The slump in energy prices is fueling concern over disinflation, just as the U.S. embarks on tighter monetary policy and as anxiety over China's management of its slowing economy rattles markets. Figures Monday indicated improvement in China's property sector, ahead of a swathe of data Tuesday that will include an update on fourth-quarter gross domestic product.
Worries about China, the Fed and global growth are likely to drive continued share market weakness and volatility in the short term.
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The MSCI Asia Pacific Index sank 1.2 percent as of 10:43 a.m. Tokyo time, sliding toward its lowest close since September 2012. The Nikkei 225 was down 1.4 percent, bringing its slump from a peak reached in June to 19 percent. The Shanghai Composite Index swung between gains and losses in the first 30 minutes of trading, while shares in Hong Kong retreated.
Australia's S&P/ASX 200 Index lost 0.7 percent, paring an initial slide of as much as 1.8 percent. The bank and resource stock-heavy gauge is down 19 percent from an April high, with BHP Billiton Ltd, the world's biggest mining company, sliding 3 percent. The Kospi index in South Korea fell 0.1 percent, while New Zealand's S&P/NZX 50 Index dropped 1.5 percent to its lowest level since December 15.
Expect volatility to remain high.
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This afternoon the S&P NZX 50 was at 6079.
The news on Iran saw Saudi Arabian equities slide more than 7 percent during Sunday trading.
Futures on the Standard & Poor's 500 Index rose 0.1 percent, swinging to gains after slipping as much as 0.8 percent earlier in the session. The U.S. benchmark sank 2.2 percent on Friday, led by technology shares and energy producers to its lowest level since August. U.S. stocks are also off to their worst start to a year on record, with a gauge of volatility expectations soaring on Friday. Markets in the U.S. are closed Monday for a public holiday.
Japan reports on industrial output Monday with central bank chief Haruhiko Kuroda telling a group of bank managers in Tokyo Monday that policy makers will monitor risks and make adjustments should they be needed. Along with the GDP update, China also reports on factory output and retail sales Tuesday.