WELLINGTON (BLOOMBERG) - Asian stocks slid the most since September, while sovereign debt advanced as concern over the rout in crude oil and ructions in the junk-bond market boosted anxiety levels just days out from the Federal Reserve's final meeting of 2015.
Commodity producers drove the regional equity benchmark toward its lowest level in almost 11 weeks as Asian shares carried on with Friday's selloff, the worst day for global equities since Sept 28.
The MSCI Asia Pacific Index slipped 1.8 per cent as of 10:04 am Tokyo time, sinking the most since Sept 29 as mining stocks fell 2.4 per cent. Energy producers slipped 1.6 per cent in a ninth straight day of losses, their longest slump since September 2012.
The Topix index in Japan tumbled 2.8 per cent, also the most since Sept 29, while the Kospi index in Seoul sank 1.3 per cent.
Singapore's Straits Times Index was 1.34 per cent lower at 2,796.77 as at 9:42 am.
Australia's S&P/ASX 200 Index slid 1.4 per cent, with energy stocks extending losses at their lowest level since 2005. Materials producers also slumped in Sydney after iron ore retreated for a ninth straight week to end Friday at a record low. New Zealand's S&P/NZX 50 Index, fell 0.8 per cent, the most since the end of September.
"Sentiment at the moment is pretty weak," said Matthew Sherwood, head of investment strategy at Perpetual Ltd. in Sydney, which manages about US$21 billion. "We're coming up to the first US rate hike in nine years and we have an environment in commodities where prices continue to decline. The US looks solid enough but it's still the weakest recovery in history and we've got all of these stresses in the emerging markets."
A wave of risk aversion has swept over markets as Opec's decision to scrap output limits continues to dog oil. Asset managers slid in the US after the uneasy calm that had settled in markets in the countdown to the Fed's interest-rate review was rocked after a high-yield mutual fund run by Third Avenue Management suspended redemptions. They were then joined by Stone Lion Capital Partners, fueling concern over stress in high-risk debt.
This was despite Chinese retail sales to factory output coming in better than expected on Saturday, soothing concern over the slowdown there, a key concern for the Fed earlier in the year.
Stone Lion, a New York-based hedge fund with US$1.3 billion under management, said Friday it was suspending redemptions in its US$400 million high-yield fund as more investors demanded their money. The move came after Third Avenue said it was liquidating a US$788 million credit mutual fund and delaying payouts to investors so it can avoid selling securities at fire- sale prices. The SPDR Barclays High Yield Bond exchange traded fund, regarded as a proxy for the junk-bond market, sank the most since 2011 on Friday.
The credit-market turmoil comes on the cusp of one of the most anticipated weeks of the year for investors, with traders pricing in 74 per cent odds the Fed will end the era of near-zero borrowing costs Wednesday and hike rates. Tightening policy would solidify the Fed's divergence from other major central banks, with policy makers in Europe and Japan still emphasizing measures to support growth.
The Bank of Japan's quarterly Tankan gauge of sentiment among large manufacturers came in higher than economists expected Monday, with data on Japanese and euro-area industrial production due later in the day. India also reports on wholesale and consumer prices.
Energy companies drove the Standard & Poor's 500 Index down 1.9 per cent on Friday. The US benchmark slid 3.8 per cent last week, its worst weekly performance since August.
S&P 500 e-mini futures added 0.1 per cent in early Monday trading, rising with contracts on the Dow Jones Industrial Average and Nasdaq 100 Index.
The rand was the stand-out performer on Monday, soaring as much as 6 per cent to just below 15 per US dollar before settling up 2.6 per cent at 15.4758.
President Jacob Zuma named the country's second finance minister in four days Sunday, putting Pravin Gordhan - who held the post from 2009 to 2014 - back into the job after his removal of Nhlanhla Nene and appointment of David van Rooyen sparked an outcry. The U-turn is raising questions about Mr Zuma's standing within the African National Congress, given Gordhan successfully steered South Africa's economy through its first recession in 17 years and was able to fend off pressure from labor unions to boost spending.
China's currency retreated for a sixth straight day offshore, slipping 0.3 per cent to 6.5519 per dollar after the publication of the new currency gauge. The move by the China Foreign Exchange Trade System is spurring speculation that policy makers want to reduce the currency's link to the dollar and let it weaken further.
Australia's dollar fell 0.3 per cent and the South Korean won lost 0.7 per cent as the greenback asserted itself amid the countdown to the Fed's expected rate increase. The Bloomberg Dollar Spot Index, a gauge of the US currency against 10 major peers, added 0.1 per cent in a third day of gains.
Government debt from Japan to Australia climbed Monday after the actions of Third Avenue and Stone Lion fueled concern that a rout in junk-debt markets will spread at the same time as money managers are faced with the shift in U.S. monetary policy.
West Texas Intermediate crude slipped 0.5 per cent to US$35.44 a barrel after sinking 11 per cent last week, its worst five days in a year. Brent dropped 0.2 per cent to US$37.86 per barrel after closing at its lowest settlement since 2008 on Friday.
The surplus in oil will persist at least until late 2016 as demand growth slows and the Organization of Petroleum Exporting Countries shows "renewed determination" to maximize output, the International Energy Agency said Friday. There is "absolutely no chance" Iran will delay its plan to increase exports despite falling oil prices, Amir Hossein Zamaninia, Iran's deputy oil minister, said in Tehran.
Copper slipped 0.2 per cent in London, falling for the first time in three days. Nickel also retreated, losing 0.5 per cent.
Gold for immediate delivery was little changed at US$1,074.21 an ounce after rallying 0.3 per cent on Friday to trim its seventh weekly drop in eight weeks.