Global equity markets fell yesterday on reports about a crackdown on margin lending in China, while the dollar retreated even as US consumer price data added to the view the Federal Reserve will raise interest rates this year.
China’s securities regulator warned investors to be cautious as Chinese shares hit seven-year highs after seven weeks of gains. Retail investors are borrowing record amounts of money to buy stocks, pushing trading volumes to new highs.
China yesterday allowed fund managers to lend stocks for short-selling and expanded the number of stocks investors can short sell to increase the supply of securities in the market.
Stocks in Europe and on Wall Street fell more than 1 per cent on the Chinese news and on worries Greece may run out of money as debt repayments loom.
Peripheral eurozone government debt yields rose while core German bund yields hit a new record low.
Prospects have dimmed that Athens can strike a reform deal at a meeting next Friday to unlock much-needed bailout funds.
MSCI’s all-country world index of equity performance in 46 countries fell 0.84 per cent, while the FTSEurofirst 300 index of top European shares closed down 1.8 per cent to 1,607.03. Germany’s DAX fell 2.6 per cent.
Traders said the European and US sell-off was worsened by the expiry of futures and options in Europe and options in the United States. Disappointing corporate reports on both sides of the Atlantic also weighed on the market.
The Dow Jones industrial average fell 240.93 points, or 1.33 per cent, to 17,864.84. The S&P 500 slid 20.74 points, or 0.99 per cent, to 2,084.25 and the Nasdaq Composite lost 71.39 points, or 1.43 per cent, to 4,936.40.
US consumer prices rose 0.2 per cent in March, propelled by higher costs for gasoline and housing. Closely watched core consumer prices rose 1.8 per cent year-on-year, inching closer to the Fed’s two per cent target.
The dollar retreated from earlier gains. The greenback fell 0.12 per cent to 118.85 yen. The euro rebounded, rising 0.3 per cent at $1.0792. The dollar index was up 0.11 per cent at 97.527.
US Treasury priced rebounded.
Benchmark 10-year notes were last up 2/32 in price to yield 1.8705 per cent. The yield on 10-year German bunds fell to an all-time low of 0.05 per cent.
Brent crude pared early losses to rally above $64 after military units protecting the largest oilfields in Yemen handed their security to armed local tribes in a sign of the weakening grip of the Yemeni state over its resources.
Brent crude for June was down 4 cents at $63.94 a barrel.
US crude for May was down 79 cents at $55.92 a barrel.