Growth worries slam stocks, oil, emerging markets
Investors have scrambled to reduce big bets in stocks and other risky assets after reaping big gains from a rally in major world equity markets that has only seen brief interruptions in the past three years
Reuters | New York
October 11, 2014 Last Updated at 00:05 IST
An index of global equities fell to a seven-month low and oilslumped to a four-year low on Friday as worries about weak worldwide economic growth continued to take a toll on investor confidence.
Most major markets declined about one per cent on Friday, though the US benchmark S&P 500 index was slightly higher in early afternoon trading, while the tech-heavy Nasdaq saw the biggest losses on Wall Street.
Investors have scrambled to reduce big bets in stocks and other risky assets after reaping big gains from a rally in major world equity markets that has only seen brief interruptions in the past three years.
Assets tied to expectations for improved growth have been hit by a recent raft of weak indicators from Europe and China at a time when other big economies, including Japan and Brazil, face their own hardships and as the US Federal Reserve is expected to reduce monetary accommodation in the coming months.
"In a vacuum of policy response, investors are selling first and asking questions later," said Jim McDonald, chief investment strategist at Chicago-based Northern Trust Asset Management, which has about $924 billion in assets under management.
"It smells like there is a high degree of involvement from systematic traders, rather than fundamental traders. The magnitude of the move has been disproportionate to the change in the fundamentals," he said.
The Dow Jones industrial average rose 47.59 points, or 0.29 percent, to 16,706.84, the S&P 500 gained 1.19 points, or 0.06 per cent, to 1,929.4, while the Nasdaq Composite dropped 31.28 points, or 0.71 per cent, to 4,347.06.
In a sign of increased volatility, the CBOE Volatility Index , or VIX, the market's favoured gauge ofWall Street anxiety, touched a high of 22.06 on Friday, its highest intra-day level since December 2012, as more investors paid up for protection against further declines.
Concerns about global growth have hit oil prices hard, though they pared losses in midday trading. Brent crude oil fell to $89.79 a barrel, after touching its lowest level since December 2010 at $88.11. US November crude was flat at $85.72.
The risk aversion has boosted buying in safe-haven government debt. Lipper data shows US-based taxable bond funds attracted $12.7 billion in inflows for the week ended Wednesday, a one-week record, while US equity funds saw $6.7 billion in outflows, with most coming from exchange-traded funds.
The yield on the US 10-year Treasury note fell to 2.307 per cent on Friday, the lowest level since June. The 30-year Treasury bond was up 4/32 in price to yield 2.3124 per cent, the lowest level since June 2013.
The MSCI all-country world index was down 0.9 per cent after hitting its lowest level since March, while the pan-European FTSEurofirst 300 index ended down more than 1 per cent.
The dollar index, which tracks the greenback against six major currencies, was up 0.31 per cent at 85.788. Against the euro, the dollar was up 0.45 per cent at $1.2633. The dollar traded flat against the yen at 107.84 yen.
Though it was still trading near four-year highs, the dollar index was on track to end a record-long rally with its first weekly fall in three months.
The Federal Reserve, later this month, is set to wind down the asset purchase programme that has been credited with boosting markets over the past two years. Many observers doubt the recent stimulus measures unveiled by the European Central Bank will make up for the Fed program.
A string of dismal data from Germany and other large euro zone economies in recent weeks has fed anxiety over a possible recession in the region, while the jury is still out on the ECB's proposed policy response.
Some investors have been speculating that the ECB will be forced to launch a sovereign bond-buying program, styled on the Fed's quantitative easing.
China's shares ended down on Friday as investors remained cautious ahead of September economic data due next week.
Economists expect the economy to have grown at its weakest pace in more than five years, according to a Reuters poll.
Euro zone bond yields bounced off record lows after top Federal Reserve officials hinted at an interest rate rise in the middle of next year, reversing some bets for a longer period of near-zero rates.
Most major markets declined about one per cent on Friday, though the US benchmark S&P 500 index was slightly higher in early afternoon trading, while the tech-heavy Nasdaq saw the biggest losses on Wall Street.
Investors have scrambled to reduce big bets in stocks and other risky assets after reaping big gains from a rally in major world equity markets that has only seen brief interruptions in the past three years.
Assets tied to expectations for improved growth have been hit by a recent raft of weak indicators from Europe and China at a time when other big economies, including Japan and Brazil, face their own hardships and as the US Federal Reserve is expected to reduce monetary accommodation in the coming months.
"In a vacuum of policy response, investors are selling first and asking questions later," said Jim McDonald, chief investment strategist at Chicago-based Northern Trust Asset Management, which has about $924 billion in assets under management.
"It smells like there is a high degree of involvement from systematic traders, rather than fundamental traders. The magnitude of the move has been disproportionate to the change in the fundamentals," he said.
The Dow Jones industrial average rose 47.59 points, or 0.29 percent, to 16,706.84, the S&P 500 gained 1.19 points, or 0.06 per cent, to 1,929.4, while the Nasdaq Composite dropped 31.28 points, or 0.71 per cent, to 4,347.06.
In a sign of increased volatility, the CBOE Volatility Index , or VIX, the market's favoured gauge ofWall Street anxiety, touched a high of 22.06 on Friday, its highest intra-day level since December 2012, as more investors paid up for protection against further declines.
Concerns about global growth have hit oil prices hard, though they pared losses in midday trading. Brent crude oil fell to $89.79 a barrel, after touching its lowest level since December 2010 at $88.11. US November crude was flat at $85.72.
The risk aversion has boosted buying in safe-haven government debt. Lipper data shows US-based taxable bond funds attracted $12.7 billion in inflows for the week ended Wednesday, a one-week record, while US equity funds saw $6.7 billion in outflows, with most coming from exchange-traded funds.
The yield on the US 10-year Treasury note fell to 2.307 per cent on Friday, the lowest level since June. The 30-year Treasury bond was up 4/32 in price to yield 2.3124 per cent, the lowest level since June 2013.
The MSCI all-country world index was down 0.9 per cent after hitting its lowest level since March, while the pan-European FTSEurofirst 300 index ended down more than 1 per cent.
The dollar index, which tracks the greenback against six major currencies, was up 0.31 per cent at 85.788. Against the euro, the dollar was up 0.45 per cent at $1.2633. The dollar traded flat against the yen at 107.84 yen.
Though it was still trading near four-year highs, the dollar index was on track to end a record-long rally with its first weekly fall in three months.
The Federal Reserve, later this month, is set to wind down the asset purchase programme that has been credited with boosting markets over the past two years. Many observers doubt the recent stimulus measures unveiled by the European Central Bank will make up for the Fed program.
A string of dismal data from Germany and other large euro zone economies in recent weeks has fed anxiety over a possible recession in the region, while the jury is still out on the ECB's proposed policy response.
Some investors have been speculating that the ECB will be forced to launch a sovereign bond-buying program, styled on the Fed's quantitative easing.
China's shares ended down on Friday as investors remained cautious ahead of September economic data due next week.
Economists expect the economy to have grown at its weakest pace in more than five years, according to a Reuters poll.
Euro zone bond yields bounced off record lows after top Federal Reserve officials hinted at an interest rate rise in the middle of next year, reversing some bets for a longer period of near-zero rates.
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