Stocks Rout Deepens With Banks Leading Latest Drop
The sell-off in global stocks deepened, taking U.S. financial shares to a 15-month low, as concern mounted that the rate of global economic growth has peaked. Oil slid as OPEC ministers met in Vienna.
The Dow Jones Industrial Average sank more than 600 points, European stocks headed for a two-year low and emerging-market equities sank almost 3 percent on bets that the truce between China and the U.S. won’t last after the arrest of Huawei’s chief financial officer.
The 10-year Treasury yield plunged to the lowest since August amid a flood of buying on haven demand. Gold rose while industrial metals tumbled. The yuan dropped the most since October. The dollar slumped.
The KBW bank index is down more than 8 percent in two days to the lowest since September 2017. All 30 Dow components dropped, with Boeing off 6.1 percent and Apple down 3 percent. Energy producers tumbled 3 percent as curde slumped to $51 a barrel. The front end of the yield curve continued to lead Treasuries higher, helped by a large block trade in 2-year futures“The biggest qualm is the trade war escalating and this is haunting the markets,” said Naeem Aslam, chief market analyst at Think Markets U.K. in London, in an email. “It is arduous to find bulls in the market and it seems to me that this game is about to become uglier.”
Traders pointed to a spate of other catalysts for the renewed risk-off tone that’s gripping financial markets. Bank of Japan Governor Haruhiko Kuroda said economic risks from abroad could be severe, and the Federal Reserve’s Beige Book report showed fading optimism over growth prospects at U.S. firms even as most districts continued to report a modest expansion. The pound drifted as U.K. Prime Minister Theresa May searched for a compromise to avoid a crushing defeat on her Brexit deal in a key vote in Parliament next week.
“There are so many forces weighing against markets right now, whether it’s the China slowdown, weak European data, Fed hikes, uncertainty around trade and now Brexit as well,” Bilal Hafeez, head of fixed-income research for EMEA at Nomura, told Bloomberg TV. “We really need to see some stabilization in any of those factors to see markets stabilize now.”
Whether or not it triggered the slide, Canada’s arrest of the Huawei CFO and reports it may extradite her to the U.S. are a blow to already fragile sentiment, just days after an apparent breakthrough on trade between America and China. The start of the futures session was marred by a sudden and unexpected plunge that sent a shock wave across equity markets.
“The arrest of the Huawei Technologies CFO gives no confidence that anything the administration came back with after Saturday night’s dinner could possibly be positive,” said Bob Iaccino, chief market strategist at Chicago-based Path Trading Partners, in an email. “This is a huge negative.”
Some of the key events investors will be focused on this week:
OPEC ministers meet in Vienna Thursday. Friday brings the U.S. monthly employment report for November. China November trade data are due on Saturday.And here are the main moves in markets:
The S&P 500 fell 2.5 percent as of 11:19 a.m. in New York, while the Dow Jones Industrial Average slumped 2.7 percent and the Nasdaq Composite Index eased 2 percent. The Stoxx Europe 600 sank 3 percent. The MSCI Emerging Market Index slumped 2.4 percent. The MSCI Asia Pacific Index fell 1.7 percent.
The Bloomberg Dollar Spot Index fell 0.2 percent. The euro rose 0.4 percent to $1.1387. The British pound gained 0.3 percent to $1.2771. The Japanese yen strengthened 0.7 percent to 112.44 per dollar.
The yield on benchmark 10-year Treasuries fell five basis points to 2.87 percent. The three-year note yield dropped six basis points to 2.74 percent as the yield on the five-year note eased six basis points to 2.73 percent. Germany’s 10-year yield fell four basis points to 0.24 percent.
West Texas Intermediate crude slumped 2.7 percent to $51.45 a barrel. Gold rose 0.4 percent to $1,242.25 an ounce. LME copper fell 1.1 percent to $6,105 per metric ton.