Tokyo market hits 28-year low on dismal US hiring report

Asian shares tumbled on Monday, pushing the broader Tokyo market to a 28-year low, as investors extended a rout of global stocks and worried about a nightmare scenario of euro-zone breakup, U.S. economic relapse and a sharp slowdown in China.

Tokyo's broader Topix index lost 2.1 percent to 693.35, a level not seen since late 1983, as Asian markets plumbed new lows for 2012. Japan's Nikkei average fell 2 percent after last week marking its ninth straight week of losses, the longest such losing streak run in 20 years.

Investors continued to head for the relative safety of bonds after weak U.S. jobs data on Friday sparked a global stampede out of equities and hit the euro and some risky currencies hard.

The MSCI's broadest index of Asia-Pacific shares outside Japan plunged 2.2 percent to their lowest since December. And U.S. stock futures pointed to yet more selling when investors wake up in North America on Monday, with S&P 500 futures down 0.8 percent in Asian trade.

The euro and the Australian dollar, which is closely linked to risk appetite, staged only meek recoveries from their battering on Friday when the Australian currency hit eight-month lows. The yen, perceived as a safer currency in times of crisis, retreated from its highs against the dollar.

Overall, though, investors hedged against global financial and economic crisis, heading for havens such as the benchmark 10-year Japanese government bond whose yield fell below 0.80 percent to its lowest since July 2003. Ten-year JGB futures prices jumped to a 19-month high.

U.S. and German government bond yields had both hit record lows on Friday.

Analysts said the flight to bonds was expected to continue until clarity emerged on issues such as the outcome of Greek elections due on June 17 and the recapitalisation of European banks, now in the shadow of a Spanish banking crisis.

"It's not an issue of risk-on or risk-off anymore, it's nervousness all over until a clear direction emerges on a long-term trend," said Hisamitsu Hara, chief FX manager at Bank of Tokyo-Mitsubishi UFJ.

"Currencies are locked in ranges with high volatility, with both the euro and the dollar facing limited upside due to their problems, while the yen's upside is also capped by wariness about intervention," he said.

U.S. job growth braked sharply for a third straight month in May and the jobless rate rose for the first time in nearly a year, with 69,000 jobs added to payrolls last month, the least since May last year. As well, 49,000 fewer jobs were created in the previous two months than had been thought.

"We may even see more talk of the need for additional quantitative easing," Standard Chartered Bank said in a research note, adding that the data had given ammunition to doves ahead of the U.S. Federal Reserve's policy meeting on June 19-20.
The median of forecasts from 15 primary dealers - those institutions that do business directly with the Fed - showed a 50 percent chance the central bank would eventually launch another round of quantitative easing, up from 33 percent on May 4, according to Reuters polling.

The weak U.S. data followed poor Chinese manufacturing data and dismal European reports on factory activity. Markets had already been on edge over the deepening euro-zone crisis.

Spot gold was down 0.5 percent at $1,616.99 an ounce on Monday after posting its biggest one-day rally in more than three years on Friday.

The yen stood at 78.18 yen against the U.S. dollar on Monday, off a 3-1/2 month high of 77.65 yen hit on Friday. It stood at 96.99 against the euro, after climbing to its highest since December 2000 of around 95.59 yen on Friday.

The euro was at $1.2410 on Monday, recovering from Friday's low of $1.2288.

"The evolving global slowdown amidst global sovereign financing dilemmas has pushed the yen back into 'super yen' territory, signalling extreme pressures," said Richard Hastings, macro and consumer strategist at Global Hunter Securities, adding that he saw little relief in the euro/yen pair.

"If the European situation worsens, then the global interest rate and policy solutions would require coordinated actions by the Bank of Japan and the Federal Reserve to assure access to U.S. dollar money markets, otherwise risk a contraction in global trade," he said.

Analysts are closely watching several monetary policy meetings due this week, including the European Central Bank on Wednesday and Bank of England on Thursday, for clues on their responses to vulnerable global growth.

U.S. crude futures fell 1 percent to $82.35 a barrel on Monday, after hitting its lowest level in almost eight months on Friday. Brent eased 0.6 percent to $97.83.

Copyright Thomson Reuters 2012