Stocks across the globe fell the most since June yesterday, weighed by German trade figures that cast doubt on the strength of the eurozone’s largest economy and by investor concern after North Korea conducted its fifth and most powerful nuclear test.
German exports fell sharply in July, shrinking the overall trade surplus for the fourth consecutive month - something not seen since 1992.
The euro peaked for the day shortly after the German data and later dipped below $1.12, while the benchmark US Treasury yield touched its highest in 11 weeks.
North Korea conducted its fifth and biggest nuclear test on yesterday and said it had mastered the ability to mount a warhead on a ballistic missile, ratcheting up a threat that its rivals and the United Nations have been powerless to contain.
At 11.14am ET (1514 GMT), the Dow Jones industrial average was down 194.56 points, or 1.05 per cent, to 18,285.35, the S&P 500 had lost 25.67 points, or 1.18 per cent, to 2,155.63 and the Nasdaq Composite had dropped 60.77 points, or 1.16 per cent, to 5,198.72.
Europe’s FTSEuroFirst 300 index of leading shares was down 1.1 per cent, dragging it down 1.5 per cent on the week. The Stoxx 600 index was down 0.4 per cent.
MSCI’s broadest index of Asia-Pacific shares outside Japan dropped 1.4 per cent, its biggest fall in over a month, after touching a 13-month high on Thursday.
Japan’s Nikkei closed flat after pulling back earlier on reports of the North Korean nuclear test . It was up 0.2 per cent for the week.
The dollar index, which tracks the US currency against a basket of six currencies, rose 0.4 per cent to 95.43, nearing its highest levels on Tuesday before a weak US service sector report knocked the dollar 1 per cent lower.
The euro fell 0.4 per cent against the dollar to $1.1211.
US Treasury yields reaching more than two-month highs, in line with Japanese government bonds, after reports suggested the Bank of Japan is considering measures to cut short- to medium-term yields, while lifting those of long-term debt.
The US Treasury market has been moving in tandem with JGBs over the last six months, analysts said, since Japanese investors of late have been the biggest buyers of US government debt.
The US yield curve reached its steepest level in three weeks at 85 basis points. That means the 10-year yield was 85 basis points higher than the two-year yield, a move driven by the jump in longer-dated borrowing costs.
Oil prices pulled back after surging more than four per cent on Thursday. Brent fell 2.5 per cent to $48.75, still up 4 per cent this week, and US crude retreated 2.4 per cent to $46.48.
Gold was last at $1,334 an ounce, down 0.3 per cent on the day but still up 0.7 per cent this week, the biggest weekly gain in six.