Stocks and bonds have begun the new week much like last week ended. Sharp losses are being recorded. The US dollar is mixed, with minor losses against the euro, yen, and sterling, but a firmer tone is evident against the dollar-bloc and emerging market currencies.  

The MSCI Asia-Pacific Index fell 2.15%, the most since the UK referendum and the third day of losses. It is finishing on its lows, which are just above the late-August low. Hong Kong’s Hang Seng had been the best performer over the past several weeks, and was the hardest hit today with a 3.4% decline.  

European stocks are also under pressure. The Dow Jones Stoxx 600 is off 2%, which could turn out to be the biggest loss since June 27. All sectors are underwater, but the worst performing are materials and financials. Of note Italian bank shares are off more than 3%. US shares are trading lower, and at this early hour, the S&P 500 look poised to gap lower and gapping lower before the weekend as well. This potential opening gap may be a normal gap, meaning that there is likely to be an attempt to fill it, unlikely the gaps created by the sharply lower opening on September 9.  

Bonds are also continuing to be sold. Asian-Pacific bond yields played some catch-up to the European and US sell-off before the weekend, but European bonds are extending their losses. Ten-year benchmark yields are mostly 2-4 bp higher, though Portugal’s bonds are being hit harder, which may be a result of relative liquidity. US Treasury yields are also up 1-2 bp as the 10-year yield nears 1.70%.  

Despite the price action, the news stream is light. The only economic report of note has been the Japanese machine tool orders for July. They rose 4.9% in the month of July, defying expectations for around a 3% fall after the eye-popping 8.3% rise in June. The 5.2% year-over-year increase is the best since January. Recall that last week, Japan revised up its estimate of Q2 GDP to 0.2% from flat. The third quarter appears to have begun on firm footing. On the margin, it plays into ideas that the BOJ is unlikely to provide fresh stimulus next week, but may be content in tweaking and making more flexible the current program.