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

Powerlifters show muscle at lakecity event

Strength athletes from Williams Lake and beyond were flexing their muscles earlier this month

Trash art project sees students reclaim wood from dump

Artwork and projects on display in Second Avenue storefront

Stand for Water calls for better mining regulation and practices

Jacinda Mack hopes others will be inspired to take action

Farmers Market sees successful start to season

More vendors expected as veggies and fruit start to ripen

Gallery: Kid’s Bike Parade

Williams Lake bicycle festival carries into the weekend

VIDEO: After the floods, comes the cleanup as Grand Forks rebuilds

Business owners in downtown wonder how long it will take for things to go back to normal

Rachel Notley to skip premiers conference to focus on pipeline deal

Kinder Morgan has ceased all non-essential spending on the Trans Mountain pipeline project until it receives assurances

B.C. tech company will power Uber Elevate

Moli and Uber announce research and development partnership.

UPDATE: Woman dies in ocean accident near Tofino hours before daughter’s wedding

“We are so thankful to everyone who helped our mom.”

Olympian sues USA Swimming, saying it failed to protect her

Ariana Kukors Smith alleges her former coach Sean Hutchison began grooming her for sexual abuse at the age of 13

Defence minister thanks troops for B.C. flood relief work

Harjit Sajjan says not only was military response quick, support from locals has been ‘tremendous’

Couple survives being buried in mudslide on B.C. highway

The couple, from Saskatchewan, were en route to Nelson when a tree fell in their path

‘So grateful:’ Injured Bronco hockey player glad he’s alive, works on recovery

Ryan Straschnitzki was badly hurt in the accident: a spinal injury, broken ribs, a broken collar bone, and punctured lung

PHOTOS: Floodwaters rise and fall in Grand Forks

The flood-ravaged Kootenay-Boundary region begins to heal

Most Read