published Feb 5, 2018 7:55:52 PM, by Adam Haigh
(Bloomberg) —

Asian stocks plunged for a second day and U.S. stock futures continued to decline after a frantic sell-off in equity markets sent the Dow Jones Industrial Average to its biggest loss in six and a half years Monday. Treasuries pulled back after a rally.

Japan’s equity benchmarks plummeted almost 5 percent and stocks across the region extended a global rout with almost all shares on the 1,000-plus member MSCI Asia Pacific Index down. Volatility on the Nikkei 225 Stock Average spiked the most since 2015 and trading volume was more than double the 30-day average. Futures on U.S. equity-indexes headed lower, abandoning an earlier attempt at finding a bottom after the S&P 500 Index Monday sank 4.1 percent, wiping out gains from January. The Dow Jones Industrial Average lost more than 1,100 points. Australian bonds gained after the rally in Treasuries.
Selling accelerated shortly after 3 p.m. in New York, with the Dow sinking more than 800 points in a matter of 15 minutes only to snap back. The blue-chip index ended lower by 4.6 percent — its steepest drop since August 2011. The Cboe Volatility Index, known as the VIX, more than doubled to its highest level in 2 1/2 years.

“The speed is reflective of some modern market structure issues that have come to dominate — it looked a little bit flash crashy there,” Michael Purves, Weeden & Co.’s chief global strategist, told Bloomberg TV. “The most important thing for bulls is that the bond market isn’t spiraling out of control and that’s off a record on the non-manufacturing PMI that printed earlier, so the foundation of the current bull trend is not really different just because of this violence we’re seeing on the screens today.”

Many finance professionals were left scratching their heads to explain the severity of the moves in a short space of time. Anxiety was already building about the outlook for monetary policy prior to Monday’s rout, with equities being tested by the surge in bond yields. Global shares had just last month risen to record highs on optimism for expanding profits and economic growth.
Even as the Dow suffered its worst point loss ever, some of the biggest investors remained relatively sanguine. Ray Dalio, founder of the world’s largest hedge fund, Bridgewater Associates, said the big declines were “just minor corrections in the scope of things” and there was a lot of cash on the sidelines waiting to buy. Jurrien Timmer, director of global macro at Fidelity Investments, said he doesn’t expect the stock market to drop more than 10 percent.

“I actually think there’s buying opportunities, maybe not today, but through this week as this sell-off exacerbates,” said Sean Fenton, a portfolio manager who oversees about A$1 billion ($788 million) at Tribeca Investment Partners in Sydney.
Elsewhere, oil slumped for a third day and metals headed lower after gaining on Monday. The yen strengthened against the dollar. Bitcoin tumbled for a sixth day to trade below $7,000.

Here are some key events scheduled for this week:
Monetary policy decisions are due in Australia, Russia, India, Brazil, Poland, Romania, the U.K., New Zealand, Serbia, Peru and the Philippines. Earnings season continues with reports from Toyota Motor Corp., BNP Paribas, BP, General Motors, Walt Disney, SoftBank, Sanofi, Philip Morris, Total, Tesla, Rio Tinto, L’Oreal and Twitter. Dallas Fed President Robert Kaplan and New York Fed President William Dudley are among policy officials due to speak in Frankfurt and New York.
These are the main moves in markets:

Stocks

Japan’s Topix index plunged 5.1 percent, poised for its biggest two-day slide since February 2016, and the Nikkei 225 Stock Average sank 5.3 percent as of 10:50 a.m. in Tokyo. Australia’s S&P/ASX 200 Index slid 3.3 percent. Hong Kong’s Hang Seng Index declined 3.6 percent and the Shanghai Composite Index fell 1.8 percent. South Korea’s Kospi index lost 3 percent. Contracts on the S&P 500 declined 1.7 percent and futures on the Dow sank 2.2 percent. They climbed more than 1 percent earlier. The MSCI Asia Pacific Index plunged 3.4 percent.

Currencies

The Bloomberg Dollar Spot Index gained less than 0.1 percent. The yen rose 0.4 percent to 108.69 per dollar after rising 1 percent on Monday. The euro added 0.1 percent to $1.2380. The pound was steady at $1.3966. The Australian dollar traded at 78.68 U.S. cents, falling to lows after retail sales and trade data missed estimates.

Bonds

The yield on 10-year Treasuries climbed more than one basis point to 2.72 percent after plunging more than 13 basis points Monday. Australia’s 10-year bond yield declined 11 basis points to 2.82 percent.

Commodities
West Texas Intermediate crude was down 1 percent to $63.49 a barrel. Gold fell 0.2 percent to $1,337.57 an ounce.

–With assistance from Matthew Burgess, Sabrina Willmer and Katia Porzecanski.To contact the reporter on this story: Adam Haigh in Sydney at ahaigh1@bloomberg.net To contact the editors responsible for this story: Christopher Anstey at canstey@bloomberg.net Cormac Mullen

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