Bonds ‘on fire’ as investors flee to safe havens

The Japanese currency rose, as did Europe’s go-to safety play, the Swiss franc, which rallied to its highest in nearly two years against the euro. The euro hovered at $1.1171 having been stuck in one of its tightest ranges ever against the dollar.

Asia ex-Japan stocks had fared better overnight as gains in South Korea and India offset weakness in Tokyo and elsewhere. Chinese shares ended little changed though the yuan faced pressure.

A private survey of China’s manufacturing sector published on Monday suggested a modest expansion in activity as export orders bounced from a contraction.

Economists noted that increased new export orders pointed to possible front-loading of US-bound shipments to avoid potential tariff hikes that US President Donald Trump — who kicked off a potentially confrontational state visit to Britain on Monday — had threatened to slap on another $300bn of Chinese goods.

“Chinese companies probably see the current export conditions as severe as during the China shock in 2015,” said Wang Shenshen, economist at Tokai Tokyo Research Center.

Rising tensions, falling activity

With the bitter trade weighing, factory activity contracted in most Asian countries and the euro zone last month, surveys showed.

The euro zone’s slowdown was for the fourth month running, and at an accelerating pace, as slumping automotive demand, Brexit and wider political uncertainty took their toll.

“The sector remains in its toughest spell since 2013,” said Chris Williamson, chief business economist at IHS Markit.

Sino-US tensions escalated again at the weekend as the two countries clashed over trade, technology and security.

A senior Chinese official and trade negotiator said on Sunday the US could not use pressure to force a trade deal, refusing to be drawn on whether the leaders of the two countries would meet at the G20 summit at the weekend.