World stock markets plunged yesterday after a near-nine per cent dive in China shares, but commodities and the dollar pared losses and US stocks staged a striking comeback in a volatile session after European markets closed.
After dropping more than 1,000 points, or almost seven per cent, at Wall Street’s open, the Dow Jones industrial average eased losses and was off less than two per cent in afternoon trading. The benchmark Standard & Poor’s 500 index was down two per cent after earlier approaching correction territory, or 10 per cent off its record high.
A key measure of US equity volatility, the CBOE Volatility Index, or VIX, shot above the 50 mark for the first time since 2009 before dropping back to 33 as US investors turned their focus back to domestic US issues.
European stocks closed off 5.4 per cent after Asian shares slumped to three-year lows when a three-month-long rout in Chinese equities threatened to get out of hand.
The Dow Jones industrial average was down 346.07 points, or 2.10 per cent, at 16,113.68.
The Standard & Poor’s 500 Index was down 47.72 points, or 2.42 per cent, at 1,923.17. The Nasdaq Composite Index was down 94.91 points, or 2.02 per cent, at 4,611.13.
In comparison, US traders rushed for the exits in yesterday’s first half-hour of trading when deepening concerns about a China-led global economic slowdown and tumbling commodities prices followed a five per cent decline in both the S&P and Dow last Thursday and Friday.
Oil prices also recovered somewhat after plunging to six-and-a-half-year lows.
Safe-haven US government and German bonds, as well as the yen and the euro , rallied as currency concerns kicked in due to China’s recent currency devaluation.
US crude was last down 3.7 per cent at about $38.95 a barrel after falling as low as $37.75 earlier in the day, and Brent was off 4.2 per cent at $43.57 after falling as low as $42.51 to take it under January’s lows for the first time.
Worries about weaker demand from normally resource-hungry China added to global supply glut concerns.
The S&P’s energy index was the weakest performer with a 2.9 per cent decline in afternoon trading.
Copper, seen as a barometer of global industrial demand, hit a six-year low, and Nickel fell sharply.
The Australian dollar fell to more than six-year lows and many emerging market currencies also plunged, while the frantic dash to safety pushed the euro to a seven-and-a-half month high above $1.17.
MSCI’s broadest index of Asia-Pacific shares outside Japan fell 5.4 per cent to a more-than-three-year low. Tokyo’s Nikkei ended down 4.6 per cent and Australian and Indonesian shares hit two-year troughs.
London’s FTSE 100, with its large number of global miners and oil firms, ended down 4.7 per cent for its 10th straight decline – its worst run since 2003.
The MSCI all-world stock index was off three per cent.