Broad stock declines in Europe and the United States dragged world equity markets lower yesterday, adding to a sell-off that has sent global stocks near 17-month lows.

The MSCI world equity index, which tracks shares in 47 countries, was flat as a 0.8 per cent decline in European markets offset modest gains in Asia overnight.

Wall Street's Dow Jones Industrial Average fell 145.16 points, or 0.6 per cent,227.96 points, or 0.95 per cent, to 23,955.35, the S&P 500 lost 22.16 points, or 0.85 per cent, 22.88 points, or 0.88 per cent, to 2,577.79 and the Nasdaq Composite dropped 54.20 points, or 0.78 per cent,dropped 66.89 points, or 0.97 per cent, to 6,856.47.

In Europe, benchmark indexes from London and Milan to Paris and Frankfurt have lost between 10 and 17 per cent year-to-date.

Some investors had hoped for a bounce back before the holidays, but any "Christmas rally" has proven elusive so far. Since 1950, Wall Street has rallied by an average of 1.3 per cent during the last five trading days of the month, according to the Stock Trader's Almanac.

The Federal Reserve is widely expected to raise US interest rates again at the end of its two-day meeting tomorrow, but what matters more for investors will be whether it cuts its guidance on rate increases in 2019.

The Fed now projects three more increases before 2020, but recent weak data and worries over Washington's protectionist policies have fuelled expectations the central bank will cut its guidance.

In China, where the economy has been losing momentum, investors will look to a speech by President Xi Jinping on Tuesday marking the 40th anniversary of China's "reform and opening" policy.

China is also expected to hold its annual Central Economic Work Conference later this week, where key growth targets and policy goals for 2019 will be discussed.

The top decision-making body of the Communist Party, the Politburo, said last week that China will keep its economic growth within a reasonable range next year, striving to support jobs, trade and investment while pushing reforms and curbing risks.

In foreign exchange markets, moves were moderate. The dollar paused near 18-month highs before the Fed meeting, after it gained from a rush into safe-haven assets due to the economic outlook.

The dollar index fell 0.23 per cent, with the euro up 0.22 per cent to $1.1332.

Benchmark 10-year US Treasury notes last rose 7/32 in price to yield 2.866 per cent, from 2.889 per cent late on Friday.

Oil prices fell about one per cent on signs of oversupply in the US, with investor sentiment under pressure from concern over the prospects for global economic growth and fuel demand.

Sign up to our free newsletters

Get the best updates straight to your inbox:
Please select at least one mailing list.

You can unsubscribe at any time by clicking the link in the footer of our emails. We use Mailchimp as our marketing platform. By subscribing, you acknowledge that your information will be transferred to Mailchimp for processing.