Asian Markets Dip as US Deficit Fears Rattle Bonds and Global Assets – Asia Market Wrap

Asian shares fell and Treasuries steadied after a selloff sparked by concerns about a proposed tax-cut bill that threatened to enlarge the US deficit.

A regional stock index dropped 0.6%, retreating from a seven-month high. US equity-index futures fluctuated after the S&P 500 index had its sharpest slide in a month. Asian currencies strengthened while a gauge of the dollar edged down for a fourth consecutive session. Yield on the 30-year US sovereign bond stayed above the crucial 5% mark. Gold gained as investors pushed back on the tax-cut plan and sought haven assets. Bitcoin jumped 2.8% to a record.

Opposition to President Donald Trump’s tax proposals and the ballooning deficit is showing up in the bond market with Treasuries falling across the curve Wednesday and sending other US assets down. JPMorgan chief  Dimon said Thursday he can’t rule out the US economy will fall into stagflation as the country faces huge risks from both geopolitics, deficits and price pressures.

The concern in the bond market is that the tax bill would add trillions of dollars in coming years to already bulging budget deficits at a time when investor appetite is waning for US assets across the globe.

House Republican leaders released a new version of Trump’s massive tax and spending bill with a higher limit on the deduction for state and local taxes and other changes in a bid to win over warring GOP factions to support the legislation.

Traders have been piling into bets that long-term bond yields would surge on concerns over the US’s swelling debt and deficits, with Moody’s Ratings on Friday lowering the nation’s credit score below the top triple-A level. For many, the message was: Unless America gets its finances in order, the perceived risks of lending to the government will rise.