The dollar fell yesterday to its weakest against the yen since October 2014 and stock markets worldwide slumped, as investors pulled away from riskier assets following weak economic data out of Europe and the United States.
Wall Street followed declines across Europe and Asia and the MSCI All-World Index dropped 1.3 per cent, putting it on target for its worst day since early February.
Banking shares led the fall in the S&P 500 index as a drop in long-dated Treasury debt yields was seen eroding banks’ profits.
The S&P 500 lost 15.44 points, or 0.75 per cent, to 2,050.69.
Shares of Allergan were hammered after the US Treasury Department on Monday unveiled rules designed to curb corporate tax inversion mergers that could possibly stymie the company’s tie-up with Pfizer Inc. Allergan shares dropped 16 per cent while Pfizer shares gained one per cent.
In Europe, the FTSEurofirst 300 share index dropped 1.8 per cent. Germany’s DAX index slid 2.3 per cent after data showed German industrial orders unexpectedly fell 2.1 per cent in February due to weak foreign demand, especially from eurozone countries.
MSCI’s broadest index of Asia-Pacific shares outside Japan fell 1.7 per cent. Japan’s Nikkei index dropped 2.4 per cent to an eight-week closing low.
The Japanese currency, often sought in times of market turmoil or economic uncertainty, strengthened, with the dollar falling to 110.05 yen. Officials in Japan, including Bank of Japan Governor Haruhiko Kuroda, said overnight that the BOJ could provide more monetary stimulus such as pushing rates further into negative territory.
Further muddying the waters for investors, two senior officials of the US Federal Reserve said the market’s views of when the central bank would raise interest rates may be too pessimistic.
The dollar fell more than one per cent against the yen and last traded at 110.05 yen. The euro fell 0.2 per cent to $1.1372.
Chinese shares bucked the trend, closing up 1.3 per cent to 1.4 per cent as trading resumed after a market holiday.
Oil, which fell in recent days on fading prospects of agreement among producers to curb oversupply, rebounded from earlier losses after data showing US demand for gasoline declined in January for the first time in 14 months.
The US Energy Information Administration said on Monday that gasoline demand fell 0.6 per cent in January. Total US oil demand fell one per cent compared with January 2015. Brent crude was up 3 cents to $37.72 a barrel, while US crude gained 2 cents to $35.72 a barrel.
Yields on low-risk government bonds fell. German 10-year yields, the benchmark for eurozone borrowing costs, fell as far as 0.08 per cent, lowest in almost a year.
US 10-year Treasury yields fell nearly 6 basis points to 1.72 per cent, lowest since March 1.