SYDNEY (Reuters) – The Japanese yen fluctuated close to a six-week high on Monday, while Asian stocks are expected to begin to fall, as risk gains fell out of favor on growing concerns about an upcoming US recession and sent global bond yields down.
A Japan Yen note is seen on this illustration picture taken June 1, 2017. REUTERS / Thomas White / Illustration
In Asia, Nikkei pointed to futures on a weak start for Japan. Australian equities fell 0.3 percent in the open while New Zealand's benchmark index dropped 0.9 percent.
Investors also kept an eye on the details of an almost two-year US survey that found no sign of interaction between Donald Trump's election team and Russia, in a major political victory for the US president.
U.S .. stock futures were marginally higher in early Asian hours.
On Friday, all three major US stock indices recorded their largest one-day percentage loss since January 3, with Dow moving 1.8 percent, S & P 500 of 1.9 percent and Nasdaq falling 2.5 percent.
Concerns about the health of the world economy increased last week after cautious comments from the US Federal Reserve sent 10-year treasury dividends to the lowest since early 2018. Adding to the fear of a more widespread global decline, production produces data from Germany showed a contraction for the third straight month.
In return, 10-year government bonds sank during the three-month rate for the first time since 2007. Historically, a reverse yield curve – where long-term prices fall below short-term – signaled a coming downturn.
"We have re-run our preferred yield curve low-inflation models, which now suggest a 30-35 percent chance of a US recession happening over the next 10-18 months," said Tapas Strickland, marketing strategist at National Australia Bank.
Usually, a 40-60 percent probability looks down over the next 10-18 months, Strickland adds by basing the analysis on previous setbacks.
"The risk of a US recession has risen and flashes yellow, and this will keep market prices high chances for the Fed cut rates."
Much of the concern about global growth comes from Europe and China who are fighting for separate tariff wars with the United States. Political turmoil in the UK over the country's exit from the EU is also a major overhang for risk permits.
On Sunday, Rupert Murdoch's Sun newspaper said on a front page editorial British prime minister Theresa May must announce on Monday that she will stand down as soon as her Brexit agreement is approved.
The British pound was last flat at $ 1,3209 after three straight days of wild gyrations. The currency fell 0.7 percent last week.
Politics was also in focus in the United States.
The long-awaited Mueller reports on Trump's campaign cooperation with Russia to help Trump's loss his democratic opponent, Hillary Clinton, marked a major milestone in the presidency as he prepares his re-election in 2020.
In the FX markets, the Japanese yen held a perceived safe haven – close to its highest since February 11. It was last from 0.1 percent to 110.04 per dollar.
The Australian Dollar, a risk game liquid ombudsman, was down for its third straight increase of $ 0.7072.
Editing Shri Navaratnam