Japanese stocks extend tumble amid Yen rally

Japanese stocks fell a second day, sliding with shares in Australia as persistent concern over market volatility and the global outlook helped the yen solidify its ascent. Crude oil climbed back above $28 a barrel before an update on U.S. stockpiles. The Topix index extended losses at its lowest level since October 2014 in Tokyo, while technology and mining stocks drove Australia’s benchmark lower. A gauge of Japanese equity volatility jumped to the highest level since August. U.S. index futures pared back some early gains after the Standard & Poor’s 500 Index reversed losses Tuesday to end the session down just 0.1 percent. While Australian government debt retreated with corporate bond risk there, Japanese 10-year yields remained below zero. The yen strengthened a third day. With equity markets lurching between selloffs and rebounds amid concern over the creditworthiness of European banks and the impact of oil’s decline, investors will be firmly focused on Federal Reserve Chair Janet Yellen Wednesday, as she testifies before the U.S. Congress. After the Bank of Japan’s surprise move into negative interest rates largely failed to assuage market concerns, Yellen will need to calibrate her commentary carefully to avoid further fueling volatility. Treasuries are off to their best start to a year since 1988 amid demand for safe investments, and gold is near a seven-month high. “There is not too much Yellen could say to further reduce market expectations for Fed activity, given how low they already are,” Kymberly Martin, a markets strategist in Wellington at Bank of New Zealand Ltd., said in a client note, referring to the outlook for further rate hikes in the U.S. “Conversely, if Yellen chooses to focus on the improvement in earnings growth and the decline in the unemployment rate shown in Friday’s U.S. labor market report, there is some potential for U.S. yields to find support, or rebound.” While markets in Malaysia and Singapore return from Lunar New Year holidays Wednesday, mainland China, Hong Kong, Taiwan, South Korea and Vietnam remain closed. By Emma O'Brien/Bloomberg