Global stocks were on pace for their biggest drop in two weeks while oil prices weakened again yesterday and soft Chinese data hit demand for risky assets.
US stocks were broadly lower, with energy shares falling more than 1 per cent as benchmark Brent crude touched a six-month low and US crude fell below $60 for the first time since March after entering a bear market.
“Everybody is starting to look at oil with a nervous eye, it’s probably too early to make any claims about oil falling because of demand versus supply but when you fall from $75 to $60 it all of a sudden makes people interested in what is going on in oil,” said Michael Antonelli, managing director, institutional sales trading at Robert W. Baird.
Adding to pressure was data from China, which showed factory-gate inflation slowed for the fourth month in October on cooling domestic demand and manufacturing activity.
On the United States side, producer prices rose more than expected in October and at their fastest pace in six years but measures of underlying price pressure cooled, bolstering the view that the US central bank is not facing a resurgence in inflation.
The Dow Jones Industrial Average fell 189.2 points, or 0.72 per cent, to 26,002.02, the S&P 500 lost 24.53 points, or 0.87 per cent, to 2,782.3 and the Nasdaq Composite dropped 114.76 points, or 1.52 per cent, to 7,416.13.
World equities snapped a streak of seven straight days of gains after the US Federal Reserve held interest rates steady but appeared to remain on track to raise its key interest rate next month.
European shares were also hit by the prospect of Fed's interest rate rises in the face of a global economy that has shown signs of slowing, apart from the United States.
The pan-European STOXX 600 index lost 0.42 per cent and MSCI's gauge of stocks across the globe shed 1.05 per cent.
The dollar, which had weakened sharply after mid-term elections, was on track to rise for its second straight day and was poised for a fourth straight week of gains.
Further dollar gains can pose headwinds for global risky assets as that translates into tightening financial conditions as most emerging market economies borrow in dollars. A strong dollar could also hurt earnings of multinational US corporations.
The dollar index rose 0.13 per cent, with the euro down 0.2 per cent to $1.1339.
The equity weakness pushed bond yields lower. Benchmark 10-year notes last rose 11/32 in price to yield 3.1911 per cent, from 3.232 per cent late on Thursday.
Oil prices fell to multi-month lows as global supply increased and investors worried about the impact on fuel demand of lower economic growth and trade disputes.
US West Texas Intermediate crude fell 0.77 per cent to $60.20 per barrel and Brent was last at $70.07, down 0.82 per cent on the day.