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|Theresa May is facing a crunch week as she tries to push through her Brexit deal for a third time, with reports that some of her cabinet colleagues are plotting to oust her. (Photo: AFP/Emmanuel Dunand)|
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.
US and European equities went into reverse on Friday as the yield on 10-year Treasury bonds fell below those for three-month 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.
'BE PREPARED FOR A TOUGH WEEK'
All three main indexes on Wall Street ended sharply down Friday, while London and Frankfurt both finished two per cent off.
The losses filtered through to Asia this week. Tokyo was hammered 3.0 per cent as the yen, which is considered a safe haven in times of turmoil, held on to Friday's advance against the dollar.
Hong Kong and Shanghai both closed two per cent off, while Sydney shed 1.1 per cent, Singapore dropped 0.9 per cent and Seoul sank 1.9 per cent.
There was also heavy selling in Wellington, Manila, Taipei and Jakarta.
In early trade London fell 0.5 per cent, Frankfurt dived 0.4 per cent and Paris shed 0.9 per cent.
"Investors should be prepared for a tough week as we close out March and the first quarter," warned Neil Wilson, chief market analyst at Markets.com.
"The bond market has been trying to speak for a while now but it's been shouted down by the equity market rally - until now."
On Monday, a survey by the National Association for Business Economics found US economists were growing increasingly concerned about the US outlook, cutting their growth forecasts and warning that the chances of recession were increasing.
On currency markets, the pound was facing 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 until Apr 12 by EU leaders 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 per cent suffered on Friday.
The losses sent regional energy firms tumbling, with Hong Kong-listed CNOOC diving 4.1 per cent, while Inpex in Tokyo was 3.8 per cent lower and Sydney-based Woodside Petroleum 2.8 per cent off.
- Key figures around 0820 GMT -
Tokyo - Nikkei 225: DOWN 3.0 per cent at 20,977.11 (close)
Hong Kong - Hang Seng: DOWN 2.0 per cent at 28,523.35 (close)
Shanghai - Composite: DOWN 2.0 per cent at 3,043.03 (close)
London - FTSE 100: DOWN 0.5 per cent at 7,168.43
Dollar/yen: UP at ¥110.03 from ¥109.93 at 2130 GMT on Friday
Pound/dollar: DOWN at US$1.3167 from US$1.3210
Euro/pound: UP at 85.79 pence from 85.59 pence
Euro/dollar: UP at US$1.1309 from US$1.1306
Oil - West Texas Intermediate: DOWN 37 cents at US$57.67 per barrel
Oil - Brent Crude: DOWN 32 cents at US$66.71 per barrel
New York - DOW: DOWN 1.8 per cent at 25,502.32 (close)