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Appetite for safe haven yen and gold rise
Appetite for safe assets was evident on Tuesday, as investors poured into havens such as the Japanese yen, gold and bonds (such as German and UK bonds).
The yen traded at its strongest level against the dollar in more than a year. It climbed to its strongest level on Tuesday since the Bank of Japan surprised markets with an unexpected expansion to its programme of quantitative easing in October 2014. Haruhiko Kuroda, BoJ governor, repeated the possibility of additional monetary stimulus this week and has sought a weaker yen to boost inflation towards 2 per cent.
German benchmark bond yields approached record lows, touching 0.08 per cent, just 3 basis points shy of the historic level reached a year ago. Gold bounced to $1,230.
Share markets in Japan and Europe fell more than 2 per cent on Tuesday, while Wall Street opened lower and gold rose 1 per cent.
Global growth remains a concern for investors. IT remains “too slow, too fragile”, according to International Monetary Fund managing director Christine Lagarde, speaking in Frankfurt on Tuesday. The IMF is widely expected to lower its forecasts for the global economy at meetings in Washington next week.
Adding to risk off sentiment were dovish remarks from US Federal Reserve chair Janet Yellen last week who cited weakening global inflation and poor market conditions as reasons for the US to “proceed cautiously” in raising interest rates.
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