Stock markets worldwide stumbled on Thursday on continuing fears over the health of the global economy, with banking shares slumping on both sides of the Atlantic.
Concern over sluggish global growth and doubts over central banks’ ability to support the world economy pushed the US benchmark S&P 500 index and the Dow Jones industrial average down more than 10 per cent for the year.
US stocks fell, with the Dow Jones Industrial Average losing as much as 400 points, as investors shunned risk worldwide amid concern that central bank efforts to support growth are losing their potency.
Equities did trim some losses, with energy stocks paring declines, after a report said Opec is ready to cooperate on cutting production. The Nasdaq 100 Index, which earlier tumbled as much as 1.6 per cent, fluctuated in late afternoon trading.
As in Europe banks led the early retreat, with Citigroup and Bank of America falling more than 6 per cent.
The Iseq index fell by 2.4 per cent in Dublin and has now lost close to 15 per cent of its value since the start of the year.
Permanent TSB fell nearly 6 per cent to €2.78 as investors fretted about bank profitability in an era of super-low interest rates. Bank of Ireland performed better, shedding only 0.6 per cent to close at 26 cents, having been down nearly 2 per cent earlier in the day.
The FTSEurofirst 300 index of top European shares sank to its lowest level in two and a half years. Yields in German bonds also tumbled as investors shied away from risky assets, putting an end to a shortlived rebound in European banks. The Euro Stoxx 50 share index fell to the lowest level since late 2013,
The FTSE 100 Index saw £34.9 billion wiped off stocks, as it hit a three-and-a-half year low amid fears over the state of the global economy. London's top flight dropped 2.4 per cent to 5,536 – its lowest level since July 2012. Barclays was down 7 per cent, or 11.2p, while Royal Bank of Scotland dropped 4 per cent, or 9.5p, to 223.5p.
“The key driver is this immense pessimism in asset markets, unwillingness to hold anything but the safest assets,” said Steven Englander, managing director and global head of G10 FX strategy at Citigroup.
Banks in Europe ended 6.3 percent lower, making them the worst-performing sector and widening their losses for the year to over 28 percent.
The declines are coming even as Fed chair Janet Yellen sought to reassure investors that the Fed will remain flexible in its approach to rates .
However, the markets already do not expect the Fed to raise rates further this year, compared with Fed forecasts that point to more tightening.
“The central banks have been taking extraordinary policy actions in the last several years . . . and we’re seeing that it hasn’t been as effective as everyone had been assuming,” said Brad McMillan, chief investment officer for Commonwealth Financial Network.
– (FT/Reuters/Bloomberg)
