Securities around the world fell yesterday after the World Bank cut its economic growth forecasts for 2015 and 2016, with stocks lower across regions and copper suffering its biggest one-day drop in more than three years.
The outlook fueled fears that the benefits of cheaper oil may be offset by anemic economies and the threat of deflation, sending investors to seek safety in government debt and gold, while the US dollar slumped against the yen.
The S&P 500 is on track for its fourth straight daily decline, while the CBOE Volatility index is up about 15 per cent so far this year.
Adding to the cautious tone in the United States, JPMorgan Chase & Co reported earnings that missed expectations, sending its shares down 3.9 per cent to $56.15. JPMorgan, a Dow component, was one of the first bellwethers to report quarterly results, casting a pall on the nascent earnings season.
Separately, government data on December US retail sales came in much weaker than expected, with sales down 0.9 per cent. “Lower growth was on everyone's mind, but to see the World Bank come out like this really put people on edge, as did the retail sales, which I found more surprising than anything,” said Robert Pavlik, chief market strategist at Boston Private Wealth in New York. “I would've expected a slight improvement, if anything, given the drop in gas prices.” The day's losses were widespread. The MSCI International ACWI Price Index fell one per cent while shares in Japan lost 1.7 per cent.
European shares fell 1.6 per cent, as mining shares slumped with the slide in copper prices and oil shares fell alongside lower crude prices.
The adviser's opinion, which provided crucial backing to the ECB, helped push the euro below its 1999 launch rate against the dollar for the first time in more than nine years.
The Dow Jones industrial average fell 253.09 points, or 1.44 per cent, to 17,360.59, the S&P 500 lost 22.38 points, or 1.11 per cent, to 2,000.65, and the Nasdaq Composite dropped 38.41 points, or 0.82 per cent, to 4,623.08. Prices of copper, a key industrial metal, fell 5.9 per cent to the lowest level in more than half a decade.
It was the biggest one-day drop since 2011. Silver was off 0.6 per cent. Gold rose 0.6 per cent.
The benchmark 10-year US Treasury note traded up 23/32 in price to yield 1.8092 per cent, the lowest since May 2013. German Bund yields fell close to a record low of 0.4 per cent.
US crude futures rose 0.6 per cent but remained down 4.5 per cent for the week, on track for their eighth straight weekly decline. Brent crude fell 0.6 per cent.