Asian stocks stumbled on Wednesday in sympathy with weak U.S. and European markets as equities investors were spooked by a vicious selloff in sovereign bonds globally.
The sudden spike in bond yields is being mirrored by an equally rapid rally in resources to suggest investors are becoming less concerned about the danger of deflation.
MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was off 0.4 percent in early trade, led by a 1.2 percent decline in Australia AXJO.
Dealers were uncertain if this was just a temporary correction of very crowded positions or a turning point toward a more reflationary world, but evidence for the latter was starting to pile up.
A broad bounce in commodities saw oil and copper prices speed to their highest for the year so far, while zinc reached ground not trod in eight months. Brent crude LCOc1 has climbed almost 50 percent from its January trough to reach $67.66 a barrel, with U.S. crude CLc1 not far behind at $60.71.THE GREAT INFLATIONARY SPIRAL MANY PREDICTED WOULD HAVE TO OCCUR AS A RESULT OF CENTRAL BANKS' ACTIONS MAY HAVE BEGUN.
IF SO, THEN EQUITY MARKETS WILL CORRECT AND DECLINE, PERHAPS A LOT AND MAYBE QUITE FAST.