Global mar­kets dive on gloomy growth out­look

The Pak Banker - - INTERNATIONAL BUSINESS/SPORTS -

Fi­nan­cial and com­modi­ties mar­kets slumped on Wed­nes­day after the World Bank cut its growth forecasts for 2015 and 2016, fu­elling fears that the ben­e­fits of cheaper oil may be off­set by anaemic economies and the threat of de­fla­tion.

Share prices, com­modi­ties and low­er­rated bonds fell as in­vestors sought safety in core gov­ern­ment bonds and cur­ren­cies like the Ja­panese yen. The dol­lar dropped 1 per­cent against the yen.

Mar­ket jit­ters were slightly soothed after a top ad­viser to the Euro­pean Union's high­est court ad­vised judges to ap­prove a bond-buy­ing plan by the Euro­pean Cen­tral Bank aimed at boost­ing the strug­gling eu­ro­zone econ­omy.

But in­vestor cau­tion was ram­pant - Ger­man Bund yields fell close to a record low of 0.4 per­cent. U.S. 10-year T-note yields hit their low­est since May 2013.

Oil and met­als prices also ex­tended their slide. Cop­per traded at its low­est in more than half a decade amid a broader com­modi­ties rout that dragged down min­ing stocks Antofa­gasta, Glen­core and An­glo Amer­i­can down 7.6 to 11.3 per­cent.

"Th­ese growth fears are keep­ing mar­kets busy, and it is linked with the de­fla­tion ques­tion," said Christian Gat­tiker, chief strate­gist and head of re­search at Bank Julius Baer. "We do have the stress in fi­nan­cial mar­ket be­cause it's about the sol­vency and liq­uid­ity of oil pro­duc­ers."

Weak oil prices pushed ex­plorer Premier Oil to say on Wed­nes­day it ex­pected to book a $300 mil­lion im­pair­ment charge on some of its as­sets for 2014 due to weak oil prices.

Emerg­ing-mar­ket eq­ui­ties un­der­per­formed as the Rus­sian rou­ble fell 1.8 per­cent to the dol­lar. Rus­sian stocks ex­tended their losses on the back of the com­modi­ties sell-off and a flare-up of vi­o­lence in east­ern Ukraine. In Asia-Pa­cific, Aus­tralia's main in­dex fell 1.0 per­cent, with min­ing shares tak­ing an added blow.

Seek­ing to support growth, Ja­panese Prime Min­is­ter Shinzo Abe's cab­i­net ap­proved a record $812 bil­lion bud­get while cut­ting new bor­row­ing for a third straight year. The share mar­ket seemed un­der­whelmed, how­ever, and the Nikkei .N225 lost 1.7 per­cent.

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