- Amidst Chinese economy concerns, oil prices continue to drop with Brent crude below $45 a barrel mark, while treasuries surge as investors seek relative safety of government bonds
A selloff in global stocks gathered pace Monday, hot on the heels of the steepest one-week decline in years for many major markets.
European stocks and US stock futures fell sharply as a rout in Chinese shares gathered pace, wiping out gains for the year. Oil prices continued to drop, while treasuries surged as investors sought the relative safety of government bonds.
Fears that China’s economy is slowing dramatically have sparked the heavy selling around the globe in recent days. Beijing’s unexpected move to devalue its currency two weeks ago raised the alarm that the world’s second-largest economy may be in worse shape than many investors had thought. Since then, weak economic data have fuelled worries that a drop-off in Chinese growth could cause a global slowdown.
The Shanghai Composite sank 8.5 percent, entering negative territory for 2015, having risen as much as 60 percent to its June peak. Japan’s Nikkei benchmark tumbled 4.6 percent.
Investors were further rattled Monday by the lack of fresh steps to stem the selloff over the weekend from Chinese authorities. The Wall Street Journal reported that the central bank is preparing to flood the banking system with liquidity to increase lending.
Futures indicated opening declines of more than 2 percent for the Dow Jones Industrial Average and the S&P 500. The Dow entered a correction on Friday, falling 10 percent from its recent peak, following its worst week since 2011. Changes in futures aren’t necessarily reflected in market moves after the opening bell.
In Europe, the Stoxx Europe 600 fell 3.0 percent in early trade. The index is now up by just over 2 percent this year, as a massive rally sparked by the European Central Bank’s stimulus program melts away. Germany’s DAX index fell 2.3 percent to its lowest since January. The UK’s FTSE was down 2.4 percent at its weakest level since January 2013.
The Dollar climbed sharply against a host of emerging-market currencies, but lost ground against the Yen and the Euro. The Japanese and European common currencies have recently tended to climb in times of market stress. The Euro was up 0.9 percent at $1.1489 – highest since January. The dollar fell 1.3 percent against the yen to ¥ 120.497.
OIL TUMBLES TO FRESH LOWS:
In the meanwhile, oil prices tumbled to fresh lows in Asian trade Monday, in line with the selloff in wider financial markets, as investors were shaken by the rout in Chinese equity markets and worries about global economic growth.
Brent crude, the global oil-price benchmark, dropped below the $45 a barrel mark for the first time since March 2009. It is now trading around 56 percent lower from its year-high of $ 103.19 a barrel reached in August last year.
Oil prices have been under pressure for several months due to oversupply concerns, but the slump deepened in recent weeks on fears of a sharp slowdown in the Chinese economy and its impact on global markets.
The recent devaluation of the Yuan also added to market uncertainty, stoking concerns that China’s oil and commodities imports could fall further.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in October traded at $39.70 a barrel, down $0.75 in the Globex electronic session. October Brent crude on London’s ICE Futures exchange fell $0.73 to $44.73 a barrel.