Stocks

The Asia Pacific gauge dropped 0.8 percent as of 8:10 a.m. London time, with Japan’s Topix tumbling 1.1 percent after earlier jumping more than 1 percent. The Shanghai Composite Index advanced for a second day, gaining 1.1 percent.

The Stoxx Europe 600 Index rose 0.4 percent. “Stay cautious,” said Mark Lister, head of private wealth research at Craigs Investment Partners in Wellington, which manages about $7.2 billion.

“Don’t be afraid to reduce risk because we expect things to be volatile from here -- it’s a relatively defensive message. There are a lot of economic issues that need to be worked through. We’ve been incrementally paring back” risk positions, including equities, he said.

Australia’s S&P/ASX 200 Index declined 0.6 percent, led by a 4.2 percent slump in a gauge of energy stocks. Woodside Petroleum Ltd., the nation’s second-largest oil and natural gas producer, tumbled 6.9 percent after reporting a 99 percent collapse in full-year profit amid the rout in energy prices.

Futures on the Standard & Poor’s 500 Index retreated 0.2 percent after the benchmark capped its best two-day gain since August on Tuesday, rising 1.7 percent.

Asia Stocks Drop With Won After Yuan Fix; Treasuries Advance

Asian stocks fell with South Korea’s won and the yen strengthened after China lowered the yuan’s daily fixing by the most in six weeks. Malaysia’s ringgit slumped to a two-week low as a deal between Saudi Arabia and Russia to freeze oil production failed to assuage anxiety over this year’s crude selloff.

The MSCI Asia Pacific Index of shares dropped for the first time in three days, while the Indonesian rupiah and the won depreciated more than 0.5 percent amid speculation their central banks will bolster stimulus to help boost economic growth. European stocks opened higher, while U.S.

equity-index futures declined. American crude was below $30 a barrel after the world’s two biggest oil producers agreed to hold output near record-high levels, dashing speculation they would cut it.

Central bank attempts to calm global markets this year amid unprecedented volatility have had mixed success, with Japanese shares initially falling after the Bank of Japan announced a move into negative interest rates. Japan’s overnight call rate fell below zero for the first time in a decade, traders said.

Oil’s volatile journey in 2016 has fueled that uncertainty, amid concern over the impact on inflation. Minutes of the Federal Reserve’s most recent meeting, where officials indicated they were monitoring the turmoil in markets, are due Wednesday. Chair Janet Yellen has subsequently indicated the global ructions may delay further tightening of U.S. monetary policy.

Yuan Declines Most in Two Weeks as Global Selloff Saps Sentiment

The offshore yuan fell the most in two weeks, tracking Asian currencies and stocks lower as a global selloff eroded the appeal of riskier assets.

Equity markets sank into bear territory amid skepticism central banks can arrest a slide in the world economy. The Bloomberg-JPMorgan Asia Dollar Index fell for a second day while stocks in Hong Kong headed for their lowest close in more than three years.

Federal Reserve Chair Janet Yellen said this year’s global tumult was in response to a drop in the yuan and in oil prices, and not the U.S. central bank’s rate increase in December. A gauge of the dollar’s strength rose 0.1 percent on Monday, paring its decline from Feb. 5 to 0.8 percent.

The yuan traded in Hong Kong fell 0.16 percent to 6.5399 a dollar as of 11:50 a.m. local time, ending three days of gains, according to China Foreign Exchange Trade System prices.

The currency is headed for a 0.4 percent advance for the week. China’s onshore financial markets will reopen on Monday, after a week-long holiday, with investors watching out for what the People’s Bank of China will do with the yuan’s reference rate.

“There’s a tug of war right now as people are debating whether the dollar’s weakness and its effect on emerging-market currencies will be sustainable,” said Sim Moh Siong, a foreign-exchange strategist at Bank of Singapore Ltd. China’s central bank is likely to keep the yuan’s fixing stable on Monday, he added.

Bear Market Descends on Global Stocks

The yearlong decline in global equities that started with a selloff in energy became a full-blown bear market Thursday as a rout in bank shares extended losses in the broadest worldwide gauge past 20 percent.

The MSCI All-Country World Index slipped 1.3 percent, pushing its decline since May to 20 percent and marking the biggest retreat from risk since Europe’s sovereign debt crisis in 2011.

Every industry has fallen since last year’s record high with decreases exceeding 25 percent in financial stocks and 30 percent in energy and commodities.

Selling from Tokyo to Frankfurt and New York is torpedoing one of the biggest expansions in share prices of the last century, particularly in the U.S. where the Nasdaq Composite Index has fallen 18 percent since July and the Standard & Poor’s 500 Index is about 125 points from its own bear market.

Investors are running for cover amid concern the rout in oil prices will destabilize credit markets and saddle banks with losses.

Only once in seven years have global stocks teetered as precariously as they are now. The MSCI gauge fell more than 24 percent between May and October of 2011 as Europe sovereign crisis raged and S&P stripped the U.S. of its AAA credit rating.

The latest decline trims an advance that from March 2009 to its height last May added about $47 trillion to equity values globally.

Equities markets have been buffeted by everything from China’s slowdown to the selloff in oil and rising U.S. interest rates, sending them to the worst start to a year on record. The rout in the oil industry is rippling through financial markets amid growing signs that credit quality is worsening.

U.S. bonds are now indicating the slowest inflation since May 2009 as investors pile into haven assets. In a departure from past bouts of global weakness, global markets this year are getting little help from the U.S.

The world’s biggest economy was sluggish enough to keep Janet Yellen’s Fed from hiking rates until December, and now corporate earnings are eroding. The spread between an index tracking global stocks outside the U.S. and the MSCI All-Country index is now the smallest since Aug 2015.

Oil prices rise, U.S. crude shrugs off equity slump

Crude oil prices rose on Tuesday, with U.S. crude shrugging off big drops in Japan's stock market and eroding some of the previous session's losses that were driven by festering concerns about global oversupply.

U.S. crude CLc1 was up 33 cents at $30.02 a barrel at 0720 GMT, after rising as far as $30.30. The contract fell about 4 percent for the third day on Monday, finishing at $29.69.

Global benchmark Brent LCOc1 was up 6 cents at $32.94 a barrel. It settled the previous session down $1.18 at $33.88 in the day session of losses.

Prices on Monday were hit by a drop in U.S. equity markets amid persistent fears about the global economic slowdown. [MKTS/GLOB]

But on Tuesday, oil market traders ignored a more than 5 percent drop in Japan's Nikkei .N225. Many Asian markets are closed for Lunar New Year holidays.

"Once again we have got a weaker U.S. dollar and I suspect that's where the bulk of the support is coming from," said Michael McCarthy, chief market strategist, CMC Markets in Sydney.

The U.S. dollar fell against the Japanese yen JPY= as sentiment towards most risk assets turned bearish amid concerns about banking stability.

A declining dollar makes oil less expensive for holders of other currencies because most trade is denominated in the greenback, potentially spurring demand and lifting prices.

Still, the glut in world oil markets is unlikely to abate soon, with a Reuters survey showing U.S. crude stocks likely rose by 3.9 million barrels in the week ended on Feb. 5.

That dims prospects of any initiative on curbing supply to boost prices, including from producers such as Russia, analysts say.

"Hopes of a coordinated supply cut from OPEC and non-OPEC members continue to fade," ANZ said in a research note on Tuesday.