Asian stocks down, bonds rally as Brexit vote looms

A pedestrian looking at an electronic stock board at a securities company in Tokyo on June 8.
A pedestrian looking at an electronic stock board at a securities company in Tokyo on June 8.PHOTO: AFP

TOKYO (REUTERS) - Asian shares stepped back on Friday (June 10) while investors poured funds into safe-haven assets amid festering concerns about a UK referendum that could push Britain out of the European Union.

MSCI's broadest index of Asia-Pacific shares outside Japan dipped 0.2 per cent while Japan's Nikkei declined 0.4 per cent.

Singapore's Strsits Times Index edged up 0.1 per cent to 2,846.73 as of 9:18 am.

Wall Street shares also pulled back on Thursday after three days of gains, with the S&P 500 losing 0.17 per cent to finish at 2,115.48, still only about 15 points below its record closing high.

Global bond yields dropped to new lows and perceived safe-haven currencies gained as investors sought shelter in the safety of bonds on concerns about Britain's referendum on European Union membership on June 23.

"There are concerns over 'Brexit' as polls seem to suggest the probability of Britain leaving Europe is rising," said Tatsushi Maeno, managing director at PineBridge Investments. "You can't buy risks assets under such conditions even if you want to," he said.

German 10-year Bunds yield also hit a record low of 0.024 per cent while the 10-year British gilt yield struck an all-time low of 1.224 per cent.

The European Central Bank's commencement of its corporate bond purchase programme also bolstered European bonds.

In Japan, the 10-year government bond yield slipped to a record low of minus 0.140 per cent.

The 10-year U.S. Treasuries yield broke out of its trading range since March to hit a 3 1/2-month low of 1.659 per cent on Thursday. It last stood at 1.685 per cent.

The US bonds were also helped by expectations that the Federal Reserve will refrain from raising interest rates next week or at the July meeting following a surprisingly weak US employment report last Friday.

"Investors who had been waiting for a Fed rate hike gave up on waiting and started buying," said Tomoaki Shishido, fixed income analyst at Nomura Securities.

The spectre of low interest rates and fear of "Brexit"lifted gold to a three-week high of US$1,271.70 per ounce.

In the currency market, the Swiss franc gained 1.6 per cent over the past five days, its biggest five-day gain since March 2015, hitting a eight-week high of 1.0886 franc per euro. It last stood at 1.0910.

The low-yielding yen, which tends to be bought back when risk appetite suffers, stood at 107.02 per US dollar, clinging near five-week highs of 106.26 set on Thursday.

The euro eased to US$1.1315 from a four-week high of US$1.1416 set on Thursday The British pound was on edge at US$1.4463, having slipped from this week's high of US$1.4664 touched on Tuesday.

Although it has stayed 4.5 per cent above its seven-year low set in late February, investors are actively seeking protection against a slide in the event of Brexit.

The cost of hedging against swings in sterling's exchange rate over the next month soared, with sterling's one-month implied volatility hitting its highest in more than seven years.

Oil prices also stepped back after notching another 2016 high.

Still, persistent threats by militants against Nigeria's oil industry and fear of more security incidents that could hit supplies worldwide limited losses in crude.

Global benchmark Brent crude futures traded at US$51.86 per barrel after having risen to as high as US$52.86 on Thursday.