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[WELLINGTON] The global equity bear market deepened in Asian trading, with Japanese stocks headed for their worst week since 2008 as anxiety over central banks' ability to revive the world economy fueled a rally in the yen. Oil rebounded from a 12-year low.
The Topix index slumped 4.4 per cent in Tokyo as traders returned from holiday, pushing the regional Asian benchmark toward its steepest weekly drop since gyrations in Chinese assets at the start of the year. US index futures signaled gains after losses there helped the MSCI All-Country Index cap a 20 per cent slide from its May record. The yen was set for its strongest two-week advance since 1998. US crude rose from a 12-year low.
"We've entered a different phase in the market," said Juichi Wako, a senior strategist at Nomura Holdings Inc in Tokyo. "We're not simply in a risk-off mode, the market's fallen to the point of pricing in a recession in the US."
Japanese Finance Minister Taro Aso said regulators will respond to market volatility if necessary after a move to negative rates failed to assuage anxieties last month.
A stronger yen threatens to imperil the world's third-largest economy through disinflation and lower profits for exporters.
Investors ignored a second day of testimony from Janet Yellen, whose indication that the Federal Reserve won't rush to raise interest rates failed to stem a selloff in riskier assets.
The MSCI's Asia Pacific Index was down 2.1 per cent as of 10.40am Tokyo time, on track for a weekly decline of 5.4 per cent. While Japan resumed trading after a Thursday break, markets in mainland China, Taiwan and Vietnam remain closed for Lunar New Year holidays.
Hong Kong's Hang Seng Index lost 0.8 per cent, the Kospi index in Seoul slipped 1.1 per cent, while Australia's S&P/ASX 200 Index sank 1 per cent. The S&P/NZX 50 Index fell 1.1 per cent in Wellington. Futures on the Standard & Poor's 500 Index rallied 0.3 per cent. The S&P 500 reduced a slump of as much as 2.3 per cent to close down 1.2 per cent in afternoon trade.
"Central bank policies and the uncertainty around their effectiveness is the big macro concern right now," said Leo Grohowski, who helps manage more than US$184 billion in client assets as chief investment officer of BNY Mellon Wealth Management in New York.
The yen gained 0.2 per cent to 112.24 per dollar. Japan's currency has strengthened against all its 31 major peers since Jan 29 amid demand for haven assets. Government officials expressed concern at the moves, fueling speculation Japan may intervene.
"The verbal intervention has already started, with Ministry of Finance officials talking about moves being rough, which looks like the new code word for undesired strength," said Ray Attrill, co-head of currency strategy at National Australia Bank Ltd. in Sydney. "110 might be some line in the sand when the MOF will lean on the BOJ to shore things up."
The New Zealand dollar fell 0.5 per cent to 66.84 U.S. cents, while the Malaysian ringgit dropped 0.1 per cent.
Japan's 10-year government bond yield rose two basis points to 2.5 basis points after falling below zero earlier this week. The similar US Treasury yield rose one basis point to 1.67 per cent.
Commodities Oil rebounded amid the most volatile prices since 2009 as speculation swirls over whether producers will act to bolster the market. Futures climbed as much as 5.9 per cent, paring this week's loss to 10 per cent.
Gold retreated 0.6 per cent after a 4.1 per cent surge on Thursday. Bullion is set to climb 5.6 per cent this week, the most since 2011, as investors flee a bear market in global stocks, a weakening dollar and the fallout from negative interest rates.
Nickel rose 1.1 per cent after slumping 3.6 per cent on Thursday to the lowest close since 2003. Prices are set to drop 5.8 per cent this week.