Bear market tightens its grip

The year long decline in global equities that started with a selloff in energy is now a full-blown bear market as a rout in bank shares extended losses in the broadest worldwide gauge past 20%.

The MSCI All-Country World Index slipped 1.3%, pushing its decline since May to 20% and marking the biggest retreat from risk since Europe’s sovereign debt crisis in 2011.

Every industry has fallen since last year’s record high with decreases exceeding 25% in financial stocks and 30% in energy and commodities.

Selling from Tokyo to Frankfurt and New York is torpedoing one of the biggest expansions in share prices of the last century.

Investors are running for cover amid concern the rout in oil prices will destabilise credit markets and saddle banks with losses.

Equities markets have been buffeted by everything from China’s slowdown to the selloff in oil and rising US interest rates, sending them to the worst start to a year on record. The rout in the oil industry comes amid signs credit quality is worsening. US bonds show the slowest inflation since May 2009.

And the US economy is sluggish.

That’s not to say the rest of the world is doing better.

All 10 primary groups in the MSCI All-Country index have declined. - Bloomberg