Global Stocks Slide After Fed Sparks Investor Concerns --Update
11 February 2016 - 11:42PM
Dow Jones News
By Riva Gold
Global stocks staged a sharp retreat Thursday as a cautious tone
from the Federal Reserve, downbeat company news and a fresh fall in
oil prices fueled anxiety about the health of the world
economy.
The Stoxx Europe 600 fell as much as 3.9% to its lowest level
since October 2014 as banking and mining shares tumbled.
Stock futures pointed to a 1.8% opening loss for the S&P
500. Changes in futures don't necessarily reflect market moves
after the opening bell.
Investors also shed stocks in Asia and piled into havens such as
gold and government bonds, while the yen hit its highest level
against the dollar since October 2014.
As investors sought safety, NYMEX gold soared 3.5% to $1235.20 a
troy ounce and 10-year U.S. Treasury bonds plunged to 1.57%. Yields
fall as prices rise.
Federal Reserve Chairwoman Janet Yellen on Wednesday highlighted
risks to growth and inflation, but delivered a less dovish tone on
interest rates than many investors had hoped for.
Ms. Yellen's statements "do not appear to take all of 2016 off
the table [for rate rises]," said Bill Northey, chief investment
officer at the Private Client Group at U.S. Bank. Ultralow interest
rates boosted asset prices for several years.
Wall Street gave up early gains after Ms. Yellen's testimony to
end lower for a fourth consecutive day.
In Europe, banking shares fell nearly 6% after a brief bout of
relief in the previous session, taking losses for the year to
28%.
The sector has been especially hard this year amid uncertainty
around central-bank policy, global growth, China's currency and the
oil price.
"The losses in energy and emerging markets are feeding into
European and U.S. banks," said Bo Christensen, chief analyst at
Danske Invest, which manages approximately $116 billion in assets.
Mr. Christensen said investors are questioning whether the concerns
will morph into a systemic banking crisis, though he doesn't
believe they will.
French bank Société Générale SA on Thursday reported a jump in
net profit, but warned that it may fall short of its profitability
target this year. Shares were down 13%.
Shares in Credit Suisse fell 7.9%, while shares UniCredit fell
7.9% and Greece's Eurobank Ergasias fell over 26%.
European banks are suffering from low interest rates, which
pressure net interest margins, while risks from losses in emerging
markets and the fallout from steep losses in energy and high-yield
debt compound the worries.
Europe's basic-resources sector also fell sharply Thursday after
mining giant Rio Tinto PLC swung to an annual loss and scrapped its
commitment to maintaining or steadily increasing its dividend each
year amid a sharp downturn in commodity prices. Shares in the miner
were down 5%.
In commodities, Brent crude oil was down 1.3% at $30.43, while
WTI crude futures fell 2.7% to $26.70, despite a drawdown in U.S.
stockpiles.
Recent falls in oil prices have fueled concerns among investors
about the strength of the global economy, as well as possible
spillover effects from bankruptcies in the energy sector and
declines in energy-dependent economies.
"We're stuck in a nexus where the feedback loop from lower
commodity prices is negative to all equities and banks," said Mr.
Christensen. "It's just a lot of bad news coming at a point in time
when markets are very skittish," he added.
Earlier, Hong Kong's Hang Seng Index fell 3.9%, catching up with
the week's selloff as the market reopened from a holiday.
Japan's Nikkei Stock Average and China's Shanghai Composite
Index were both closed, but investors continued to pile into the
yen, which tends to rise in times of market stress. The dollar was
down 1.8% against the yen at Yen111.28.
It is the sharpest percentage decline over such a short period
since October 2008, said Lee Hardman, currency analyst at Bank of
Tokyo-Mitsubishi, adding the sharp strengthening of the yen is
fueling speculation that Japanese authorities could intervene
directly to dampen volatility.
In other currencies, the euro was up 0.4% against the dollar at
$1.1325, its highest since October.
Write to Riva Gold at riva.gold@wsj.com
(END) Dow Jones Newswires
February 11, 2016 07:27 ET (12:27 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.