The global equity rout extended in U.S. exchanges after Asian and European markets tumbled, sending a gauge of world stocks toward the biggest three-day slide since 2015. Treasuries steadied and the dollar rose.
The S&P 500 Index dropped at the start of trading Tuesday, the day after falling the most since 2011. The Dow also declined.
Earlier, the Stoxx Europe 600 Index slumped the most since June 2016, and Japan’s Nikkei entered a correction as most of the shares on the 1,000-plus member MSCI Asia Pacific Index declined. Amid the sea of red, some safe-haven assets, including gold and European bonds, traded higher. Treasury yields swung before nudging higher.
What began with rising bond yields has become a selloff across global equity markets, as investors fret the return of inflation and higher rates that could erode profitability for companies already trading at elevated valuations. Traders will be watching how the moves unfold from here — a sustained stock slump has the potential to undermine consumer and business sentiment, crimp borrowing and so start to curtail global growth.
“Global equities did not experience any material weakness for nearly two years, valuations have become stretched and technical, positioning and sentiment indicators all flashed red in recent weeks,” said Emmanuel Cau, equity strategist at JPMorgan Chase & Co. “The unwinding of this extreme bullishness could have a bit more to go in the near term.”
As assets decline, volatility is surging, causing pain for investors who had positioned for price swings to remain muted. Trading was halted in some exchange-traded products used to bet against volatility, and the VIX Index was set for the highest close since 2009.
Elsewhere, oil slumped for a third day and metals joined the selloff after gaining on Monday. Bitcoin erased losses to trade around $7,000 after at one point sinking below $6,000 for the first time since October.
Here are some key events scheduled for this week:
Monetary policy decisions are due in Russia, India, Brazil, Poland, Romania, the U.K., New Zealand, Serbia, Peru and the Philippines. Earnings season continues with reports from Walt Disney, SoftBank, Sanofi, Philip Morris, Tesla, Rio Tinto, L’Oreal and Twitter. Dallas Fed President Robert Kaplan and New York Fed President William Dudley are among policy officials due to speak in Frankfurt and New York.These are the main moves in markets:
Stocks
The S&P 500 Index fell 1.7 percent as of 9:32 a.m. New York time. The Stoxx Europe 600 Index decreased 2.5 percent, hitting the lowest in about five months. The U.K.’s FTSE 100 Index dipped 2.3 percent, reaching the lowest in almost 10 months. The MSCI Emerging Market Index sank 3.1 percent to the lowest in five weeks.
Currencies
The Bloomberg Dollar Spot Index increased 0.3 percent to the highest in almost two weeks. The euro decreased 0.2 percent to $1.2338, the weakest in almost two weeks. The British pound dipped 0.7 percent to $1.3861. The Japanese yen declined 0.3 percent to 109.43 per dollar.
Bonds
The yield on 10-year Treasuries climbed four basis points to 2.75 percent. Germany’s 10-year yield declined four basis points to 0.69 percent, the largest drop in more than two months. Britain’s 10-year yield fell three basis points to 1.527 percent, the biggest fall in almost five weeks.
Commodities
West Texas Intermediate crude dipped 1.2 percent to $63.35 a barrel. Gold fell 0.4 percent to $1,333.91 an ounce. Copper fell 1.3 percent to $7,078.50 per metric ton.Terminal users can read more on the slide in stocks in other Bloomberg stories: Hedge Funds Now Look Prescient After Cutting Short-Vol Bets Volatility-Targeting Funds Could Sell $225 Billion of Stocks ‘Buy the Dip’ Takes Hold at Allianz to JPMorgan as Rout Deepens As Investors Raced to Hedge, ETF Options Trading Beat ETFs Volatility Jump Has Traders Asking About VIX Note Poison Pill VIX-Related ETPs Go Wild in After-Hours Trading After Rout VIX at 38 Is Waterloo for the Beloved Short Volatility Trade
