Global equity markets fell yesterday as civil unrest in Hong Kong weighed on investor sentiment, while Treasury debt prices rose over uncertainty sparked by the protests.
Stocks on Wall Street opened sharply lower following declines in Europe and Asia as Hong Kong protesters defied volleys of tear gas and police baton charges in one of the biggest political challenges for China since the Tiananmen Square crackdown 25 years ago.
Shares of companies exposed to Hong Kong fell, including HSBC and luxury goods group Richemont. HSBC closed down 2.3 per cent and Richemont fell 1.7 per cent.
Losses on Wall Street were initially broad, with all 10 of the S&P 500’s sectors lower as equity investors shrugged off the latest data showing strong US economic growth. Stocks subsequently came off their lows, and utilities, seen as a defensive play, rebounded.
The sell-off was overdone and was exacerbated in the absence of any news of consequence to the market, said Donald Selkin, chief market strategist at National Securities in New York.
“The problem is we’re not going to get any upside motivations here until the start of third-quarter earnings seasons next week,” said Selkin, adding Friday’s jobs report will be the next major event investors are watching for.
When the CBOE Volatility Index rose above 17, or close to resistance points in April and early August, the market’s decline receded, Selkin said.
The VIX was last up 7.1 per cent at 15.90, and Wall Street pared losses of almost one per cent soon after the open.
The Dow Jones industrial average fell 68.39 points, or 0.4 per cent, to 17,044.76. The S&P 500 slid 7.3 points, or 0.37 per cent, to 1,975.55 and the Nasdaq Composite lost 9.35 points, or 0.21 per cent, to 4,502.85.
MSCI’s all-country world index was down 0.5 per cent, while the FTSEurofirst 300 index of leading European shares closed down 0.43 per cent at 1,371.11.
Benchmark 10-year US Treasury notes gained 15/32 in price to yield 2.4807 per cent.
Uncertainty around the protest in Hong Kong was seen as one driver of demand for bonds. Month-end buying also added to demand.
The dollar erased early gains against the yen on nervousness the democracy protests in Hong Kong might hurt the local economy and the city’s status as a global financial hub.
The greenback gained 0.07 per cent to 109.35 yen after hitting a six-year peak of 109.74 yen in Asian trading, according to Reuters data. The euro rose 0.13 per cent to $1.2700.
US crude oil hovered around $94 a barrel, carrying over strength from a strong report on US gross domestic product last week, while Brent edged up after nearing a two-year low last week.
Brent for November delivery rose 8 cents to $97.08 a barrel.
US crude rose 50 cents to $94.04 a barrel.