Asia shares crumble as oil falls, bond yields soar on stimulus doubts

Reuters: Asian shares wallowed near six-week lows on Wednesday, bruised by a fall in oil prices on renewed worries about a supply glut and as investors grew nervous about the diminishing capacity of the world’s major central banks to shore up economic growth.

MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.3% in early trade, extending its decline since late last week to 4.4%, while Japan’s Nikkei dropped 0.7%.

On Wall Street, S&P 500 Index lost 1.48% to 2,127.02, a two-month low. Although it has managed to hold above its 200-day moving average, which stood at 2,121, a break of that level could sap market confidence.

The energy index’s 2.86% slide led declines as oil prices tumbled as much as 3% after both the IEA, the world’s energy watchdog, and OPEC said the global crude glut would persist for much longer than expected.

Brent crude futures last stood at $47.35 per barrel in Asia, up 0.5% from the previous close but still down 1.4% on the week.

Investors were also unnerved by a sharp rise in long-term global bond yields.

The 10-year U.S. Treasuries yield rose to a three-month high of 1.752%, having risen more than 20 basis points from a week ago.

The rise in U.S. bond yields came even as expectations on the Federal Reserve’s monetary policy outlook hardly changed.

U.S. interest rate futures are pricing in about 10% chance of a rate hike at next week’s policy review and about 60% chance by December.

While the rise in U.S. bond yields was in part due to heavy Treasury and corporate debt supply, it also reflected concerns about global central bank policy.