NEW YORK: World stocks plummeted again yesterday and government bonds hovered near multi-year highs after a series of rate rises from global central banks rekindled fears that aggressive policy tightening could drag economies into recession.
Following a relief rally on Wednesday when investors welcomed the US Federal Reserve's aggressive move to raise rates by 75 basis points – its biggest rate increase since 1994 – by buying shares, two other spates of policy tightening in Britain and Switzerland seemed to have sobered investors into focusing on the chance that economies could slow as rates rise.
“Can the economy take it? So far, leading indicators show good readings, but we remain wary of a consumer strike,” said Giuseppe Sette, president of the quantitative research firm Toggle.
MSCI's gauge of stocks across the globe slumped 2.25% to hover near a 19½-month low.
In New York, the Dow Jones Industrial Average fell 741.46 points, or 2.42%, to 29,927.07, the S&P 500 lost 123.22 points, or 3.25%, to 3,666.77 and the Nasdaq Composite dropped 453.06 points, or 4.08%, to 10,646.10. All three indices were trading at their lowest in at least 1-1/2-years.
The benchmark S&P 500 suffered its sixth decline in seven sessions.
Underscoring the gloom in markets, MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.84%, and the pan-European Stoxx 600 index dropped 2.47%.
European stock markets closed at their lowest level in three months. London's FTSE 100 shed 3.1% to wrap the day at 7,044.98 points while Frankfurt's DAX fell 3.3%to 13,038.49 and the Paris CAC 40 dropped 2.4% at 5,886.24.
Swiss stocks were close to confirming a bear market pattern, having fallen about 19% since a Jan 3 closing high.
Earlier yesterday, Asian markets mostly closed lower.
Hong Kong shares closed at near three-week lows while China stocks dropped in bumpy trade. The Hang Seng index fell 2.2% to 20,845.43, while the China Enterprises Index lost 2.6% to 7,259.41 points. The blue-chip CSI300 index fell 0.7% to 4,250.06, while the Shanghai Composite Index lost 0.6% to 3,285.38 points.
The Tokyo Stock Exchange, however, snapped a four-day losing streak. The Nikkei 225 average ended up 0.4% at 26,431.20. The broader Topix gained 0.64% to 1,867.81. – Reuters, AFP
