Wall Street extends its decline, world equities at one-year low

Brent, US crude oil both drop by more than $1 per barrel

NEW YORK, Oct 11, (Agencies): A global measure of equity prices fell to a 1-year low on Thursday as Wall Street extended its October slide into a sixth session as investors feared an escalating US trade war with China and risks from a recent climb in interest rates.

Gold rose as sliding global stock markets prompted risk-wary investors to seek the metal, and a drop in US Treasury bond yields helped push the dollar lower.

MSCI’s gauge of stock performance in 47 countries fell 2.2 percent, the panEuropean FTSEurofirst 300 index of leading regional share lost 2.1 percent.

Most sectors in Europe traded in the red, with tech stocks bearing the brunt of selling pressure after the big overnight sell-off in US technology shares.

The Dow Jones Industrial Average fell 198.28 points, or 0.77 percent, to 25,400.46. The S&P 500 lost 24.93 points, or 0.89 percent, to 2,760.75 and the Nasdaq Composite dropped 30.71 points, or 0.41 percent, to 7,391.34.

Benchmark US Treasury 10-year notes rose 14/32 in price, pushing their yield down to 3.1724 percent.

It will take more than a daily stock market correction to stop the Fed from hiking, said George Goncalves, managing director and head of fixed income strategy at Nomura in New York.

The dollar index fell 0.31 percent, with the euro up 0.4 percent to $1.1564. The Japanese yen strengthened 0.01 percent versus the greenback at 112.29.

Oil prices slumped to two-week lows as global stock markets fell, with investor sentiment made more bearish by an industry report showing US crude inventories rising more than expected.

US crude fell 1.98 percent to $71.72 per barrel and Brent was last at $81.30, down 2.15 percent on the day.

US

Wall Street dropped on Thursday but the losses were less severe than the brutal sell-off in the previous session as a bounce in technology stocks helped limit losses.

Nine of the 11 S&P major sectors were lower, led by energy and health stocks. Technology companies, which led the sell-off on Wednesday, managed to post slight gains.

The stock market is caught amidst a storm of worries ranging from the impact of trade tensions on corporate profits to Treasury yields at multi-year highs and, more recently, Hurricane Michael making landfall in Florida.

While stocks had coped well with rising trade tensions between the United States and China over the past few months, the sharp rise in bond yields earlier this month, accompanied by hawkish comments from Federal Reserve officials, proved to be a tipping point that triggered the sell-off on Wall Street.

A smaller-than-anticipated rise in consumer prices, which eased some fears of inflation pressures rising, helped stocks take a bit of a breather around the open, but the slide soon resumed.

Still, the high-growth technology sector was up 0.4 percent, coming off a 4.8 percent slide on Wednesday. Gains were led by Microsoft, up 1.9 percent.

“The growth stocks, which are the path leaders, typically bounce from the bottom first,” said Tom Plumb, portfolio manager of the Plumb Balanced Fund in Wisconsin.

At 12:07 pm ET, the Dow Jones Industrial Average was down 137.02 points, or 0.54 percent, at 25,461.72, the S&P 500 was down 17.76 points, or 0.64 percent, at 2,767.92 and the Nasdaq Composite was down 2.25 points, or 0.03 percent, at 7,419.80.

Energy stocks fell 1.77 percent as oil prices hit two-week lows after an industry report showed US crude inventories rose more than expected.

The defensive utilities and real estate sectors were both down more than 1 percent, as were the health and financial sectors. JPMorgan, Citigroup and Wells Fargo, which report quarterly results on Friday, were between 0.2 percent and 1.7 percent lower.

The bright spots included Delta Air Lines, which rose 3.7 percent after it forecast returning to margin growth next year and posted a better-than-estimated quarterly profit on strong demand and tight cost controls.

Declining issues outnumbered advancers for a 2.00-to-1 ratio on the NYSE and a 1.28-to-1 ratio on the Nasdaq.

Europe

European stocks slumped to a 21-month low on Thursday after Wall Street’s worst losses in eight months triggered a surge of global selling that also hit Asia and emerging markets.

Losses in London, Paris and Milan were at nearly 2 percent ahead of what looked set to be another early dive from Wall Street, although it wasn’t quite as dramatic as the overnight session in Asia. The euro was at $1.1550, up from a low of $1.1429 early in the week. The dollar lapsed to 112.17 yen, a retreat from last week’s 114.54 peak.

That left the dollar at 95.263 against a basket of currencies.

Asia

MSCI’s broadest index of Asian shares not including Japan ended down 3.6 percent, having struck its lowest level since March 2017. China’s main indexes had slumped over 5 percent.

It meant MSCI’s 24-country emerging market index was having its worst day since early 2016, after Wall Street’s swoon had given the 47-country world index equivalent its worst day since February.

Japan’s Nikkei ended down 3.9 percent, its steepest daily drop since March. The broader TOPIX lost around $207 billion in market value, falling 3.5 percent.

Shanghai’s drop was its most severe since February 2016 and left it at its lowest level since late 2014. Shares in Taiwan were even harder hit, losing 6.3 percent. Seoul’s Kospi index dropped 3.8 percent. China’s benchmark Shanghai Composite Index dived to near fouryear lows on Thursday, joining a global equities rout after a tech sell-off battered Wall Street overnight.

The Shanghai Composite plunged more than 6 percent before recouping some ground to end the day down 5.22 percent at 2,583.46 points, levels not touched since Nov. 25, 2014. It was the index’s worst day since Feb 25, 2016.

The blue-chip CSI300 index, meanwhile, tumbled 4.8 percent to 3,124.11 points, its lowest level since July 2016.

The smaller Shenzhen index and the start-up board ChiNext Composite index were also crunched by big losses, down 6.45 percent and 6.3 percent, respectively.

Oil

Oil prices slumped to two-week lows on Thursday as global stock markets fell, with investor sentiment made more bearish by an industry report showing US crude inventories rising more than expected.

Brent crude fell $1.95 a barrel to a low of $81.14, its weakest since Sept. 26, before recovering a little to trade around $81.90 by 1253 GMT. Brent lost 2.2 percent on Wednesday. On Oct 3, it hit a four-year high of $86.74.

US light crude dropped $1.54 to $71.63 but then recovered to around $72.25. The contract lost 2.4 percent in the previous session.

“Oil bulls are bearing the brunt of another bruising session as yesterday’s selling frenzy intensifies,” said Stephen Brennock, analyst at London brokerage PVM Oil. “At the heart of the price malaise are concerns that oil demand will be adversely impacted by a myriad of downside risks facing the global economy.”

Share markets in Asia plunged to a 19-month low on Thursday after Wall Street’s worst losses in eight months led to broader risk aversion, a rise in market volatility gauges and concerns over overvalued stock markets in an environment of rapidly rising dollar yields.

OPEC cut its forecast of global demand growth for oil next year for a third straight month on Thursday, citing headwinds facing the broader economy from trade disputes and volatile emerging markets.

US crude stockpiles rose more than expected last week, while gasoline inventories increased and distillate stocks drew, the American Petroleum Institute said on Wednesday.

Crude inventories climbed by 9.7 million barrels in the week to Oct 5 to 410.7 million, compared with analyst expectations for an increase of 2.6 million barrels.

The US Energy Information Administration (EIA) is due to release official government inventory data Thursday at 11 am EDT (1430 GMT).

In the US Gulf of Mexico, producers have cut daily oil production by roughly 42 percent due to Hurricane Michael, the Bureau of Safety and Environmental Enforcement said. The cuts represent 718,877 barrels per day (bpd) of oil production. While production has been cut because of the hurricane, “down time is expected to be brief and Gulf of Mexico output now accounts for a comparatively small portion of total US production”, Jim Ritterbusch, president of Ritterbusch and Associates, said in a note to clients.

US oil output is expected to rise 1.39 million bpd to a record 10.74 million bpd, the EIA said in its monthly forecast on Wednesday.

Gold

Gold rose on Thursday, climbing above $1,200 per ounce as sliding global stock markets prompted risk-wary investors to seek out the metal, with a softer dollar also supporting prices.

Spot gold gained 0.8 percent to $1,203.92 an ounce by 1149 GMT. US gold futures added 1.2 percent to $1,207.40 an ounce.

European stocks fell in line with a slump on Wall Street, pointing to growing risk aversion across global markets and turning greater attention to US inflation data later in the day for clues on the pace of monetary tightening.

“Gold is finding a bit of support from the global sell-off seen in equities. If this (sell-off) persists, we will start seeing more of a move to gold as a safe-haven asset,” ING analyst Warren Patterson said.

“Rising US yields and general strength in the dollar have meant that investors have largely ignored gold. But people are seeing fairly good value at current levels on the back of some macro concerns,” Patterson said.

Wednesday’s dive on Wall Street prompted US President Donald Trump to lash out against the US Federal Reserve for raising interest rates.

Naeem Aslam, chief market analyst at Think Markets UK Ltd, said there was some concern that the Fed’s independence may be compromised – a factor seen as supportive to gold.

Gold has fallen more than 12 percent since hitting a peak in April, with investors increasingly switching to the safety of the greenback as the US-China trade war unfolded against a backdrop of rising US interest rates.

But the market has managed to stay above a 1-1/2-year-low of $1,059.96 hit in mid-August, propped up by limited safe-haven buying at lower levels linked to concerns over economic growth and inflationary pressure from soaring oil prices.

Holdings in the SPDR Gold Trust, the world’s largest gold-backed exchangetraded fund, rose 1.21 percent to 738.99 tonnes on Wednesday. This was the fund’s first gain in holdings since July and the biggest inflow since March.