Japan selloff extends stock rout in Asia as Yen to gold ascend

Anxiety over the global economy coursed through financial markets, with equities in Tokyo sliding the most since September as demand for safer investments raised the prospect of benchmark Japanese bond yields breaking below zero. Gold headed for its longest rally since 2011 as the yen extended gains near a one-year high. Stock gauges in Japan and Australia slumped with U.S. index futures as markets from China to South Korea remained closed for Lunar New Year holidays. Evidence of mounting distress in global credit markets boosted government debt, with yields on New Zealand notes sliding to a record low, while 10-year Japanese government bond rates shed two basis points to 0.025 percent. The cost of protecting Australian corporate debt from default surged the most since September. The euro joined the yen in a haven currency rally, while Australia’s dollar fell. U.S. crude oil rose back above $30 a barrel. “Those off celebrating Lunar New Year will be happy their markets are closed,” Chris Weston, chief markets strategist in Melbourne at IG Ltd., said in an e-mail to clients. “These markets need a strong shake up and sharp downside move, followed by a wave of buying to settle things down. But until that comes there will be no clarity, absolutely no confidence and a bucket load of concern. It almost feels as though the markets are pushing central banks into some kind of action, but they don’t know exactly what it is they want.” The distress that has brought global equities to the brink of a bear market in 2016 is flaring in the credit space, with the cost of protecting against company defaults worldwide at its highest level in almost four years. Deutsche Bank AG shares and debt slumped last session amid questions over the lender’s ability to pay coupons on its riskiest bonds. Concern over China’s capacity to deal with its slowing economy, coupled with the lurching selloff in crude oil has fueled angst over the global outlook. The mixed response to Japan’s imposition of negative interest rates has only added to anxiety levels. Markets in mainland China, Hong Kong, South Korea, Malaysia, Singapore and Taiwan are closed for the New Year holiday Tuesday. (Emma O'Brien/Bloomberg)