Asian markets plunged Monday after a sharp sell-off on Wall Street fuelled by concerns about the global economy and a possible recession in the United States.
There appeared to be very little reaction to news that an investigation found no evidence of collusion between Donald Trump’s election campaign and Russia, which observers said removed some uncertainty from markets.
After a broad-based rally since the start of the year built on hopes for China-US trade talks and a more dovish Federal Reserve, dealers have been spooked by signs of a worldwide slowdown.
“It’s pretty clear we’ve seen a shift in momentum,” said Michael McCarthy, chief market strategist at CMC Markets Asia Pacific. “What changed Friday was that there was a strong response to the weakness in growth.”
US and European equities went into reverse Friday as the yield on three-month US Treasury bonds fell below those for 10-year notes — the first time this had happened since before the global financial crisis in 2007.
This so-called inverted yield curve shows investors are more willing to buy long-term debt — usually considered higher risk — as they consider the short-term outlook more risky.
The yield curve is closely watched since it has inverted prior to recessions in recent decades.
The rush to the 10-year US bond market followed weak manufacturing data out of the US, eurozone giant Germany and France.
That came days after the Fed’s announcement that it was unlikely to lift interest rates this year owing to unease about the US and global economy.
“Realistically, the European data has generally been poor for most of the year anyway, so this in itself isn’t news,” said OANDA senior market analyst Jeffrey Halley.
“The US data has been middling, but both confirm what everyone already knew, the global economy is slowing down after a 10-year quantitative-easing-induced bull run,” he added, referring to the massive programme of post-crisis stimulus.
Pessimism is growing
All three main indexes on Wall Street ended sharply down, while London and Frankfurt were both two percent off.
The losses filtered through to Asia, where Tokyo was hammered 3.2 percent by the break owing to a surge in the yen, which is considered a safe haven in times of turmoil.
Hong Kong dropped 1.7 percent and Shanghai was off more than one percent, while Sydney shed 1.3 percent, Singapore dropped 1.2 percent and Seoul sank 1.7 percent.
There was also heavy selling in Wellington, Manila, Taipei and Jakarta.
“Investor pessimism is growing as are recessionary indicators from the bond markets,” warned Nick Twidale at Rakuten Securities.
The pound was facing fresh pressure with Prime Minister Theresa May’s political future hanging in the balance as she looks to push her Brexit deal through parliament for a third time.
She has been given by EU leaders until April 12 to win backing for the agreement or find a viable alternative that could include a lengthy extension to the final divorce.
However there are reports that members of her own cabinet are plotting to oust her and were planning to confront her at a crucial meeting later Monday.
On oil markets, the prospect of a global slowdown dug into prices, with both main contracts extending the losses of more than one percent suffered on Friday.
The losses sent regional energy firms tumbling, with Hong Kong-listed CNOOC diving 3.3 percent, while Inpex in Tokyo was 4.4 percent lower and Sydney-based Woodside Petroleum three percent off.
World Bank pushes G-20 to extend debt relief to 2021
World Bank Group President David Malpass has urged the Group of 20 rich countries to extend the time frame of the Debt Service Suspension Initiative(DSSI) through the end of 2021, calling it one of the key factors in strengthening global recovery.
“I urge you to extend the time frame of the DSSI through the end of 2021 and commit to giving the initiative as broad a scope as possible,” said Malpass.
He made these remarks at last week’s virtual G20 Finance Ministers and Central Bank Governors Meeting.
The World Bank Chief said the COVID-19 pandemic has triggered the deepest global recession in decades and what may turn out to be one of the most unequal in terms of impact.
People in developing countries are particularly hard hit by capital outflows, declines in remittances, the collapse of informal labor markets, and social safety nets that are much less robust than in the advanced economies.
For the poorest countries, poverty is rising rapidly, median incomes are falling and growth is deeply negative.
Debt burdens, already unsustainable for many countries, are rising to crisis levels.
“The situation in developing countries is increasingly desperate. Time is short. We need to take action quickly on debt suspension, debt reduction, debt resolution mechanisms and debt transparency,” said Malpass.
Kenya’s Central Bank Drafts New Laws to Regulate Non-Bank Digital Loans
The Central Bank of Kenya (CBK) will regulate interest rates charged on mobile loans by digital lending platforms if amendments on the Central bank of Kenya Act pass to law. The amendments will require digital lenders to seek approval from CBK before launching new products or changing interest rates on loans among other charges, just like commercial banks.
“The principal objective of this bill is to amend the Central bank of Kenya Act to regulate the conduct of providers of digital financial products and services,” reads a notice on the bill. “CBK will have an obligation of ensuring that there is fair and non-discriminatory marketplace access to credit.”
According to Business Daily, the legislation will also enable the Central Bank to monitor non-performing loans, capping the limit at not twice the amount of the defaulted loan while protecting consumers from predatory lending by digital loan platforms.
Tighter Reins on Platforms for Mobile Loans
The legislation will boost efforts to protect customers, building upon a previous gazette notice that blocked lenders from blacklisting non-performing loans below Ksh 1000. The CBK also withdrew submissions of unregulated mobile loan platforms into Credit Reference Bureau. The withdrawal came after complaints of misuse over data in the Credit Information Sharing (CIS) System available for lenders.
Last year, Kenya had over 49 platforms providing mobile loans, taking advantage of regulation gaps to charge obscene rates as high as 150% a year. While most platforms allow borrowers to prepay within a month, creditors still pay the full amount plus interest.
Amendments in the CBK Act will help shield consumers from high-interest rates as well as offer transparency on terms of digital loans.
Scope Markets Kenya customers to have instant access to global financial markets
NAIROBI, Kenya, Jul 20 – Clients trading through the Scope Markets Kenya trading platform will get instant access to global financial markets and wider investment options.
This follows the launch of a new Scope Markets app, available on both the Google PlayStore and IOS Apple Store.
The Scope Markets app offers clients over 500 investment opportunities across global financial markets.
The Scope Markets app has a brand new user interface that is very user friendly, following feedback from customers.
The application offers real-time quotes; newsfeeds; research facilities, and a chat feature which enables a customer to make direct contact with the Customer Service Team during trading days (Monday to Friday).
The platform also offers an enhanced client interface including catering for those who trade at night.
The client will get instant access to several asset classes in the global financial markets including; Single Stocks CFDs (US, UK, EU) such as Facebook, Amazon, Apple, Netflix and Google, BP, Carrefour; Indices (Nasdaq, FTSE UK), Metals (Gold, Silver); Currencies (60+ Pairs), Commodities (Oil, Natural Gas).
The launch is part of Scope Markets Kenya strategy of enriching the customer experience while offering clients access to global trading opportunities.
Scope Markets Kenya CEO, Kevin Ng’ang’a observed, “the Sope Markets app is very easy to use especially when executing trades. Customers are at the heart of everything we do. We designed the Scope Markets app with the customer experience in mind as we seek to respond to feedback from our customers.”
He added that enhancing the client experience builds upon the robust trading platform, Meta Trader 5, unveiled in 2019, enabling Scope Markets Kenya to broaden the asset classes available on the trading platform.