Shares, commodities and currencies were pulverised in overnight trading as extraordinary volatility returned. The change in market behaviour that began less than a week ago resumed after two eerily calm sessions. The re-pricing of assets in light of higher interest rates continues, and Asia Pacific investors are facing torrid trading today.

Ten year bond yields in the US, Germany, the UK and many other countries are at multi-year highs as nascent inflation emerges in key economies. In accelerating declines US indices shed 4% last night, the sum of the previous week. Ironically investors favoured the more certain earnings streams of utilities and property stocks despite their obvious sensitivity to rising interest rates. The contradictory investment logic indicates markets have much to resolve and volatility will continue to bite.

A stronger USD weighed on commodity markets. Commodity currencies like the AUD fell with oil, copper and gold. However the safe haven status of the Japanese Yen attracted buyers and it was the most sought currency overnight. The strong relationship between USD/JPY and the Nikkei index could see more value destruction in Tokyo than other regional centres.

Corporate results and Australian home lending data are unlikely to shape trading, despite the high relevance to financial stocks. Traders will instead monitor the out of hours trading of US futures markets to calibrate their responses.

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