Stock indexes worldwide stumbled yesterday on fears over the health of the global economy, with banking shares slumping on both sides of the Atlantic, while safe-haven 10-year Treasury yields hit their lowest since 2012.
Concern over sluggish global growth and doubts over central banks’ ability to support the global economy pushed the US benchmark S&P 500 index and the Dow Jones industrial average down more than 10 per cent for the year.
The FTSEurofirst 300 index of top European shares sank to its lowest level in two and a half years.
The dollar hit its lowest against the safe-haven yen since October 2014 of 110.985 yen, and was on track for its worst week against the Japanese currency since 2008 on the fears over the health of the global economy.
Banks in Europe ended 6.3 per cent lower, making them the worst-performing sector and widening their losses for the year to more than 28 per cent. Shares of Societe Generale, France’s second-biggest bank, closed down 12.6 per cent after disappointing results.
Worries also hit shares of US banks, with the S&P financial index last down three per cent and ranking as the S&P 500’s worst-performing sector. Concerns over profitability in a low-growth, low-interest rate environment have knocked confidence in the banking sector this week, particularly in Europe.
The declines are coming even as Fed Chair Janet Yellen sought to reassure investors in Congressional testimony that the Fed will remain flexible in its approach. However, the markets already do not expect the Fed to raise rates further this year, compared with Fed forecasts that still point to more tightening.
Yields on benchmark 10-year US Treasury notes hit 1.53 per cent, their lowest level since August 2012, on the worries over global growth and the effectiveness of central bank policy.
MSCI’s all-country world equity index, which tracks shares in 45 nations, was last down 5.3 points, or 1.48 per cent, to 352.78. The index hit its lowest level in more than two and a half years and was down over 20 per cent from an all-time high.
The Dow Jones industrial average was last down 299.56 points, or 1.88 per cent, at 15,615.18. The S&P 500 was down 26.99 points, or 1.46 per cent, at 1,824.87. The Nasdaq Composite was down 31.25 points, or 0.73 per cent, at 4,252.35.
Europe’s broad FTSEurofirst 300 index closed down 3.68 per cent at 1,195.76.
Oil prices tumbled, with US crude approaching 12-year lows hit last month on brimming crude inventories and a Goldman Sachs forecast that prices would remain low and volatile until the second half of the year.
Brent crude was last down 27 cents, or 0.88 per cent, at $30.57 a barrel. US crude was last down 41 cents, or 1.49 per cent, at $27.04 per barrel.
Safe-haven asset gold surged to its highest in a year. Spot gold prices were last up 4.2 per cent at $1,247.33 an ounce.