Stock markets worldwide fell yesterday after weak Chinese factory data and a surprise rate cut by Australia’s central bank unnerved investors, sending benchmark Treasury yields to nearly two-week lows.
Activity at China’s factories shrank for the 14th straight month in April as demand stagnated, a private survey showed. The data contributed to a drop in oil prices on demand worries, given the country’s status as a major oil importer.
US shares gave back Monday’s gains. The drop in oil prices helped push the S&P 500 energy index down more than 2.3 per cent, making it the leading decliner among the 10 major S&P sectors. Financial shares were also a top decliner, with the S&P financial index down more than two per cent.
The Reserve Bank of Australia cut interest rates to a record low of 1.75 per cent, the first easing in a year. The cut added to investors’ uneasiness surrounding central banks’ attempts to boost growth through aggressive policy easing.
European shares fell to three-week lows, with Germany’s Commerzbank leading decliners after a slump in profits, while the weak Chinese factory data pushed down mining companies. European banking shares broadly slumped around 3.5 per cent.
The Chinese economic data and RBA rate cut fanned worries about the health of the global economy, in turn pushing yields lower and boosting prices on safe-haven US government debt.
MSCI’s all-country world equity index was last down 5.12 points, or 1.27 per cent, at 399.05.
The Dow Jones industrial average was last down 190.49 points, or 1.06 per cent, at 17,700.67. The S&P 500 was down 23.75 points, or 1.14 per cent, at 2,057.68. Europe’s broad FTSEurofirst 300 index dropped 1.54 per cent at 1,321.59.
Yields on US Treasuries maturing in five, 10, and 30 years hit their lowest levels since April 20, with benchmark 10-year yields hitting a session low of 1.784 per cent. Two- and three-year yields hit their lowest levels in more than two weeks, at 0.742 per cent and 0.891 per cent, respectively.
In addition to concerns over demand, oil prices fell as rising output from the Middle East and North Sea renewed concerns about global oversupply. Brent crude was last down 2.12 per cent at $44.86 a barrel. US crude was last down 2.55 per cent, at $43.64 per barrel.
The dollar was last down 0.19 per cent against the yen at 106.19 yen, near the 18-month low of 105.55 yen. The yen gained on doubts the Bank of Japan would intervene to stem its dramatic rise, which has undermined attempts to deflate the developed world’s third-biggest economy.