Global stocks tumble as Wall Street braces for more losses

The Dow Jones industrial average posted its biggest percentage decline since August 2011

(Canadian Press photo)

Stock markets around the world took a battering Tuesday, following a dramatic sell-off on Wall Street that triggered concerns that a potentially healthy pullback from record highs could turn into a bear market.

Hopes that Wall Street won’t repeat the scale of Monday’s losses helped limit the selling during European trading hours. Futures markets suggested another, but more limited drop, in the U.S., with the Dow and S&P 500 futures down 0.9 per cent and 0.5 per cent.

The drop, which gathered pace Monday when the Dow Jones industrial average posted its biggest percentage decline since August 2011, has been fueled by fears the U.S. Federal Reserve will raise interest rates faster than expected due to a pick-up in wages.

That has fed into widespread concerns that markets were stretched following a strong run over the past year that pushed many indexes to record highs. Some also questions the possible role of computer-driven algorithmic trading in the precipitous declines.

“If investors look at underlying earnings growth and the fundamentals of the global economy, there is reason for optimism,” said Neil Wilson, senior market analyst at ETX Capital.

“However once this kind of stampede starts it’s hard to stop.”

Among the biggest fallers on Tuesday was Tokyo’s Nikkei 225 stock average, which ended 4.7 per cent lower at 21,610.24, having earlier been down a massive 7 per cent. All other Asian markets tanked, too, including the Shanghai Composite index, which closed 3.4 per cent lower at 3,370.65 and Hong Kong’s Hang Seng, which skidded 5.1 per cent to 30,595.42. Australia’s benchmark S&P ASX 200 slid 3.2 per cent to 5,833.30 and South Korea’s Kospi declined 1.5 per cent to 2,453.31.

The selling persisted into European trading hours, though at a more moderate pace. The FTSE 100 index of leading British shares was 2.3 per cent lower at 7,170 while the CAC 40 in France fell 2.2 per cent to 5,171. Germany’s DAX was down 2.1 per cent at 12,423.

Though many stock indexes are close to where they started the year, the losses mark a major reverse following a sustained period of gains, a pullback that market pros have been predicting for some time.

Stephen Schwarzman, the chairman and CEO of financial firm Blackstone, warned recently of a potential “reckoning” in markets.

A 10 per cent drop from a peak is often referred to as a “correction” while a bear market is generally defined as a 20 per cent or so drop in indexes. The S&P 500, for example, has fallen 7.8 per cent since it set its latest record high on Jan. 26.

“Seemingly the only hope for the markets at the moment is that investors suddenly decide that the sell-off has been a bit overdone,” said Connor Campbell, a financial analyst at Spreadex.

Despite the sea of red in global stock markets, there are hopes that the retreat won’t last long given that global economic growth has picked up and the financial system is more robust since the financial crisis.

“That is not to say that we won’t see further falls in coming days, but in an environment where growth is good and earnings are expected to rise globally, there are decent underpinnings,” said James Knightley, chief international economist at ING.

The catalyst for the latest sell-off came in jobs figures last Friday showing that wage growth in the U.S. was creeping higher. For many traders, that was a sign that the Fed will have to pick up the pace of its rate hikes — higher wages have the capacity to fuel inflation.

On Monday, the Dow finished down 4.6 per cent at 24,345.75, while the S&P 500 sank 4.1 per cent, to 2,648.94. Falls like this have not been registered since August 2011 when investors were fretting over Europe’s debt crisis and the debt ceiling impasse in Washington that prompted a U.S. credit rating downgrade.

Still, while some financial assets became more attractive to investors as perceived havens of value. Gold, for example, was up 0.5 per cent at $1,343 an ounce.

The U.S. dollar remained resilient despite the stock market sell-off, which at one stage Monday saw the Dow shed 1,597 points. The euro was up 0.4 per cent at $1.2415 while the dollar rose 0.1 per cent to 109.22 yen.

____

Kurtenbach contributed from Tokyo. Rod McGuirk in Canberra, Australia, and Mari Yamaguchi in Tokyo also contributed to this report.

Pan Pylas And Elaine Kurtenbach, The Associated Press

Just Posted

Death-penalty decision delayed for alleged cold-case killer

William Talbott is charged here in the 1987 slaying of a young Victoria-area couple

Island Fire soccer sends three players to BC Summer Games

Oak Bay’s Jake Robson and two teammates round out U15 roster

Emergency crews responding to incident in Goldstream Provincial Park

Delays in both directions on the Trans-Canada Highway in Langford

Project provides barrier to suicides at hospital parkade

VIHA budgets $650,000 for work at Royal Jubilee Hospital parkade

Scam arrives on Saanich senior’s doorstep

Pair of fraudulent officers threaten to arrest 90-year-old woman

BC Games: Dance, spoken-word highlights at Opening Ceremony in Cowichan

Hundreds of athletes and thousands of volunteers, coaches, parents and officials

B.C. city wants pot punted from farmland

Concerned about conversion from growing food to making marijuana

World’s translators push back on forcing Trump interpreter to testify

Democrats had asked translator to testify about Trump’s lengthy conversation with Putin in Helsinki

No decision on B.C. school stabbing suspect’s mental fitness for trial

The BC Review Board could not determine whether Gabriel Klein, 21, is fit to stand trial

FRESH IDEA: Victoria tech firm beneficiary of streamlined government system

Software developer FreshWorks awarded $1.5-million contract using new bid program

Canadian government threatens to retaliate if Trump imposes auto tariffs

U.S president had suggested that auto imports pose a national security risk to the U.S.

Wildfire evacuation order forces bride to search for new wedding venue

Fitzpatrick Family Vineyards is under an order due to the Mount Eneas wildfire south of Peachland

Recent online kitten abuse video raises serious social media questions

UBC and UFV profs weigh in on the subject of online sharing, shaming, and our digital landscape

Most Read