published Oct 10, 2018, 6:15:36 PM, by Adam Haigh
(Bloomberg) —

Traders were set for losses in Asian stocks after a rout in U.S. equities that deepened late in the day amid concerns the trade war is heating up as financial conditions tighten, dampening the outlook for profits. The yen and Treasuries climbed.

Futures indicated Japanese shares will decline more than 3 percent, with Hong Kong stocks also seen lower. Shares in Australia and New Zealand slid. The S&P 500 Index fell the most since February and the Nasdaq 100 Index tumbled more than 4 percent for its worst day in seven years as equity volatility spiked.

Industrial and construction supplies distributor Fastenal Co. added to angst that the trade conflict with China is raising materials costs that will crimp profit margins, while French luxury goods maker LVMH confirmed China is enforcing customs rules more strictly. The dollar fluctuated and 10-year Treasury yields declined to 3.16 percent.

Just a day before the start of America’s third-quarter earnings season, signs are mounting that companies might not be able to deliver the runaway growth that’s bolstered equities so far in 2018. Investors have long fretted that the trade war would crimp profits, and now a group of companies is warning that is happening at the same time that rising bond yields make the cost of borrowing higher.

“Earnings are really important because that was part of the concern that sparked the sell-off,” Darrell Cronk, president and chief investment officer at Wells Fargo Investment Institute, told Bloomberg TV in New York. “The concern heading into the third quarter earnings season is about how much trade and tariffs will dent earnings.”

Meanwhile, President Donald Trump responded to the U.S. stock market sell-off by again criticizing the Federal Reserve for raising interest rates, calling it a “mistake.” He said the decline was “a correction that we’ve been waiting for for a long time,” after being briefed on the market turmoil.

Elsewhere, Wall Street’s “fear gauge,” as the Cboe Volatility Index, or VIX, is known, soared the most since February. American crude headed back below $73 a barrel as Hurricane Michael threatened to slash fuel demand across the U.S. Southeast.

Terminal users can read more in our Markets Live blog.

Here are some key events coming up:

The U.S. Treasury is in the midst of $230 billion worth of debt auctions this week. The IMF and World Bank will hold meetings in Bali from Friday, where finance chiefs from around the world will gather. A closely watched gauge of U.S. consumer prices probably remained elevated in September and rose 2.3 percent from a year earlier, according to forecasts ahead of Thursday’s release. JPMorgan Chase & Co., Citigroup Inc. and Wells Fargo & Co. kick off earnings season for U.S. banks on Friday.

These are the main moves in markets:

Stocks

Futures on Japan’s Nikkei 225 fell 3.4 percent in Singapore trading. Contracts on the FTSE China A50 lost 2.7 percent. Futures on Hong Kong’s Hang Seng slid 1.4 percent. Australia’s S&P/ASX 200 Index declined 0.9 percent. S&P 500 futures dropped 0.2 percent in early Asian trading. The S&P 500 Index declined 3.3 percent. The Nasdaq 100 lost 4.4 percent to the lowest since July 3. The Stoxx 600 sank 1.6 percent to the lowest since March.

Currencies

The yen was at 112.19 per dollar after gaining 0.6 percent. The offshore yuan traded at 6.9264 per dollar. The Bloomberg Dollar Spot Index fell 0.1 percent. The euro bought $1.1523.
Bonds

The yield on 10-year Treasuries fell five basis points to 3.16 percent. Australia’s 10-year bond yield dropped four basis points to 2.71 percent.

Commodities

West Texas Intermediate crude added to a 2.4 percent slide, falling 0.7 percent to $72.66 a barrel. Gold was little changed at $1,194.25 an ounce.

-With assistance from Sarah Ponczek and Jeremy Herron.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 Andreea Papuc, Cormac Mullen
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