A wave of selling gripped global markets as the rout in all but the safest assets deepened.
The European stock rout is getting worse as equities tumbled for a fourth day and Germany’s benchmark gauge headed for a bear market.½. Thirteen out of 18 western-European markets have fallen 10 per cent or more from their high.
US crude was down 3 per cent at $39.20 a barrel while Brent lost 2.4 per cent to $44.40 a barrel.
Losses were across the board in Europe, although basic resources – demand for which is heavily dependent on China – paced the decline, with the Stoxx 600 index for the sector down 5.8%. In the meantime, things can get worse. “Volatility will persist until we see better data there or strong policy action through forceful monetary easing”.
The pan-European FTSEurofirst 300 was down 6.4 percent going into the close of the trading session, wiping off more than 500 billion euros ($582.55 billion) from the index’s tota market capitalisation.
The weak global cues and a steep fall in Shanghai stocks, along with concerns over the Indian government’s stand on minimum alternate tax (MAT), shaved 1039.34 points, or almost 3.80 per cent, off a key equity index of the Bombay Stock Exchange (BSE) at noon on Monday.
Hong Kong shares closed down 5.17 per cent on Monday, finishing their seventh day of losses at a 15-month low.
All major European stock indexes were in the red, pushing the Stoxx 600 further into a correction as it is now down 15% from its all-time high, hit on April 15.
More than $5 trillion has already been erased from the value of global stocks since China unexpectedly devalued the yuan. “I hope we can survive”.
In Frankfurt, utility RWE declined 4.4% and peer E.ON dropped 3.6%. The measure is about 25% below an April high, with a gauge of price momentum dropping to the lowest since the October 1987 stock-market crash.
Currencies of basic resource-producing countries led declines, with the ruble tumbling 2.5 per cent to 70.86 per dollar and Malaysia’s ringgit sliding 1.8 per cent to a fresh 17- year low. Technology companies were the second-biggest drag on the Asia-Pacific gauge Monday. The euro and yen are rallying as traders have drastically cut their expectations that the Federal Reserve will raise interest rates next month. Treasury 10-year note yields fell as low as 1.97%.
HeidelbergCement and K+S retreated 3.9% and 3.6%, respectively. “The prospects of an increase in rates from the Fed in September look very slim indeed at this point in time”.
The selloff will worsen, according to Doug Ramsey, the chief investment officer of Leuthold Weeden Capital Management LLC, whose quantitative research into market breadth, valuation and investor sentiment foreshadowed the drubbing in American stocks last week.
The Bloomberg Commodity Index fell 2.1 percent, heading for the lowest closing level since August 1999. South Africa’s rand dropped 1.7 percent and New Zealand’s currency weakened 1.4 percent.