Stock indexes worldwide have fallen on fears over the health of the global economy and banking sector.
MSCI’s world stock index dropped to more than 20 per cent below its all-time high, while safe-haven 10-year Treasury yields hit their lowest since 2012.
Concern over sluggish global growth and doubts over central banks’ ability to support the global economy pushed the US benchmark S&P 500 index down 10.5 per cent for the year.
The FTSEurofirst 300 index of top European shares sank to its lowest level in 2-1/2 years.
The US dollar hit its lowest against the safe-haven yen since October 2014, at Y110.985, and was on track for its worst week against the Japanese currency since 2008.
“There are mounting concerns about the ability of central banks to continue to prop up asset prices,” said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington.
“That’s part of why we’re seeing assets across the board come under pressure.”
Banks in Europe ended 6.3 per cent lower, making them the worst-performing sector and widening their losses for the year to more than 28 per cent.
Shares of Societe Generale, France’s second-biggest bank, closed down 12.6 per cent after disappointing results.
Worries also hit shares of US banks, with the S&P financial index ending down about 3 per cent. Concerns over profitability in a low-growth, low-interest rate environment have knocked confidence in the banking sector this week, particularly in Europe.
The declines came even as Federal Reserve Chair Janet Yellen sought to reassure investors in congressional testimony that the Fed will remain flexible in its approach.
The markets, however, do not expect the Fed to raise rates further this year, compared with Fed forecasts that still point to more tightening.
“Credit has been signalling these concerns, and to some extent other markets, and particularly equity, have caught up with what credit had been telling them, which was: we’re really worried about global growth, we’re really worried that central banks are running out of ammunition,” said David Riley, head of credit strategy at BlueBay Asset Management in London.
Yields on benchmark 10-year US Treasury notes hit 1.53 per cent, their lowest level since August 2012, on the worries over global growth and the effectiveness of central bank policy.
MSCI’s all-country world equity index, which tracks shares in 45 nations, was last down 4.73 points, or 1.32 per cent, at 353.35. The index hit its lowest level in more than 2-1/2 years and was last down more than 20 per cent from an all-time high.
The Dow Jones industrial average ended down 254.56 points, or 1.6 per cent, at 15,660.18. The S&P 500 lost 22.78 points, or 1.23 per cent, at 1,829.08. The Nasdaq Composite dropped down 16.76 points, or 0.39 per cent, to 4,266.84.
Europe’s broad FTSEurofirst 300 index closed down 3.68 per cent at 1,195.76.
US crude fell, hitting a 12-year low of $US26.05 a barrel as domestic stocks grew and Goldman Sachs called for depressed prices until the second half of the year.
It settled down $US1.24, or 4.52 per cent, at $US26.21 a barrel. Brent crude settled down 78 cents, or 2.53 per cent, at $US30.06 a barrel.
Safe-haven spot gold surged 5.3 per cent to $US1,260.60, the highest in a year. US gold futures for April delivery settled up 4.5 per cent at $US1,247.80 per ounce.