A roundup of trading on major world markets:
NEW YORK – Investors have dumped US stocks across the board, pushing the S&P 500 and the Dow Jones industrial average down more than 10 per cent for the year, on fears over the health of the global economy.
At its lowest on Thursday, the Nasdaq was 19.34 per cent lower than its peak closing high on July 20, and about 35 points shy of being confirmed in bear territory.
The S&P financial sector, already the worst performer among the 10 major sectors on the index, led the rout with a 3.23 per cent decline, its steepest drop since September 1.
The rout in financial stocks is being led by banks as investors fear that the negative interest rates employed by a growing band of central banks to spur economic growth is now part of the problem rather than the solution.
US Federal Reserve Chair Janet Yellen on Thursday said the central bank is looking at negative interest rates after saying the weakened global economy and steep slide in US equity markets is tightening financial conditions faster than the Fed wants.
“It’s a very difficult market right now. Clearly, anything perceived as a risk asset is being sold down,” said Steven Baffico, chief executive officer at Four Wood Capital Partners in New York.
“The bigger issue … what, in my mind, is driving all this selloff is that markets are losing confidence in central banks’ ability to act as an effective referee,” he said.
At 15.22 pm ET (0722 Friday AEDT), the Dow Jones industrial average was down 279.83 points, or 1.76 per cent, at 15,634.91.
The S&P 500 was down 24.62 points, or 1.33 per cent, at 1,827.24 and the Nasdaq Composite index was down 20.28 points, or 0.47 per cent, at 4,263.32.
LONDON – Britain’s top share index has slumped, with a sharp sell-off in major banking and mining stocks pushing the market down to its lowest level in more than three years.
The blue-chip FTSE 100 index on Thursday finished 2.4 per cent weaker at 5,536.97 points after falling to 5,499.51 points, the lowest level since late 2012.
Banks were among the worst performers amid concerns about the industry’s profitability in a low-growth, low-interest rate environment, with the UK Banks index sinking 5 per cent to a seven-year low.
“Banks have been hit hard and further steep weakness can not be ruled out in the near-term. Margin pressure is becoming a big concern for the sector,” said Jawaid Afsar, senior trader at Securequity. “Earnings results from some big banks have done little to revive investors’ confidence.”
The International Monetary Fund said it was concerned about recent sharp share price declines for European banks, as a robust banking sector was needed to sustain economic recovery.
HONG KONG – Turbulence has torn through global markets as investors sought the safety of Japanese yen, gold and top-rated bonds while dumping US dollars on bets the Federal Reserve could be done with raising interest rates.
Even the absence of Tokyo for a holiday could not stop the US dollar from hitting a 15-month low on the yen, and gold finally broke major chart resistance to reach its highest since May as a wave of risk aversion swept through trading floors.
“What this shows is that the risk-off mode has come back very quickly and that the worst may still be to come in these markets,” said Rabobank European strategist Emile Cardon.
“What is different to previous times is that the bad news in now coming from everywhere, China, Portugal the US the commodity sector the banking sector. It’s like several smaller crises could combine into one big crisis.”
The flight from risk told on most Asian shares, with Hong Kong – a favourite channel for global investors to play China – diving 4.2 per cent as investors there returned from the long Lunar New year holidays. Mainland China markets are closed all week.
MSCI’s broadest index of Asia-Pacific shares outside Japan shed 1.4 per cent, and South Korea resumed with a 2.9 per cent drop.
WELLINGTON – The S&P/NZX 50 Index fell 32.46 points, or 0.5 per cent, to 5987.03.
