* German Bund yields hit highest since Brexit vote
* European stocks on course for biggest loss since June
* Fed risks, BOJ reports send bond yields higher
* Signs that central banks' stimulus commitment waning
* Clinton illness adds to nervous mood
(Adds quote, data and updates prices)
By Abhinav Ramnarayan
LONDON, Sept 12 European stocks and bonds fell
in a volatile market on Monday, hit by growing concerns that
global central banks' commitment to the post-crisis orthodoxy of
super-low interest rates and asset purchase programmes may be
German Bund yields rose further above zero to
as high as 0.06 percent, their highest since Britain's Brexit
vote in late June, and the rise in lower-rated euro zone
countries' yields was even sharper.
Major European stock indexes fell as much as 2 percent,
putting them on course for their biggest losses since June, and
Wall Street futures pointed to a fall of 0.7 percent at the open
Selling was driven by revived prospects of the U.S. Federal
Reserve hiking rates next week, and concerns that the European
Central Bank and the Bank of Japan may be slowing their monetary
policy easing efforts.
"It's a pretty broad-based sell-off on an increasing view
that perhaps central banks are going to draw back from providing
ever more easing," said RBC European economist Cathal Kennedy.
"The BOJ and the ECB ... are questioning the effectiveness
of their own policy. Add to this an increasing probability that
the Fed will raise rates sooner rather than later."
The fear of another "flash crash" such as happened last year
- when 10-year Bunds rose from 0.16 percent in late April to
0.77 percent in just over two weeks, may also be preying on
"Most focus at the moment is on a possible re-think by
central banks and a move away from aggressive easing and the
possibility of a new sell off," said Jaime Costero Denche, a
bond strategist at BBVA.
"I don't think a sell-off such as last May (2015) is likely,
but that is the market fear at the moment," he said.
Earlier, Asian shares suffered their sharpest setback since
June as investors were rattled by rising bond yields and talk
that U.S. rates might rise as early as next week.
Hong Kong's benchmark stock index fell more than 3 percent,
its biggest one-day drop in seven months.
The sell-off there also followed reports that the Bank of
Japan may look to steepen the Japanese yield curve at a policy
review this month, with markets worried that, if it goes down
that path, tapering buying of long-dated bonds may be among the
Some Fed members have been talking up the September meeting
as being "live" for a rate hike, even though futures <0#FF:>
only imply a one-in-four chance of a move then.
Three more Fed officials are expected to speak later on
Monday, including board member and noted dove Lael Brainard, and
any hint of hawkishness would likely further pressure bonds and
"Market participants are wondering if maybe she (Brainard)
is being wheeled out to give the market one last warning of a
rate hike at next week's meeting," said Marshall Gittler, head
of research at broker FXPRIMUS.
"The thinking is that if someone as dovish as she starts
talking like a hawk, people will notice. Her speech will be
Such risks led Wall Street's fear gauge, the VIX index
, to its highest close since late June on Friday. The Dow
shed 2.13 percent on Friday, while the S&P 500
lost 2.45 percent and the Nasdaq 2.54 percent.
In the forex market, the risk aversion benefited perceived
safe havens such as the yen while hitting carry trades in higher
yielding currencies including the Australian dollar.
The Aussie has lost 2.25 percent against the yen in two
sessions to stand at 76.52, while the Japanese
currency was firm on the U.S. dollar at 102.06.
The euro fell marginally against the dollar to $1.1220
after weak German trade data dragged it down on Friday
from a high of $1.1285. The dollar index, which tracks it
against a basket of six currencies, was up marginally to 95.364.
Adding to Monday's jittery mood, Democratic presidential
candidate Hillary Clinton fell ill at a Sept. 11 memorial
ceremony and had been diagnosed with pneumonia.
Markets have generally assumed Clinton would win the
presidency and have not truly considered the implications, both
economic and for national security, should her rival Donald
Oil prices extended Friday's 4 percent fall in Asia after
reports showed increasing drilling activity in the United
States, indicating that producers can operate profitably around
current levels and bring on new supply.
Brent crude was off 82 cents at $47.18 a barrel,
while U.S. crude lost 85 cents to $45.03.
For Reuters new Live Markets blog on European and UK stock
markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets
(Additional reporting by Wayne Cole in Sydney; Editing by Robin