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Global stocks fall, as plummeting oil prices raise concerns

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The Equities market. Image source moneychoice

The Equities market. Image source moneychoice

Global equity markets fell sharply at the weekend, as slumping oil prices raised concerns about slower growth, while the dollar slipped against the yen on views the Bank of Japan may not ease policy as much as expected.

Trading in crude oil and the bond market was volatile, while stock investors were skittish in the wake of the euphoria that followed the U.S. Federal Reserve’s first interest rate hike in almost a decade on Wednesday.

Wall Street accelerated its slide into the close, with the Dow closing more than two per cent lower and the broad market S&P 500 down almost as much. All S&P sectors declined, led by a 2.51 per cent fall in financial stocks. SPSY, and the S&P 500 notched its biggest two-day percentage loss since Sept. 1.

The sell-off appeared tied to lower oil prices and the Fed’s move, and not options expiration, said Randy Frederick, managing director of trading and derivatives for Charles Schwab in Austin, Texas.

“The market is more sensitive to oil than anything else,” he said.

MSCI’s all-country world stock index .MIWD00000PUS fell 1.28 percent, while the FTSEurofirst 300 index .FTEU3 of leading European shares closed down 1.05 per cent at 1,419.35.

The Dow Jones industrial average .DJI lost 367.39 points, or 2.1 per cent, to 17,128.45. The S&P 500 .SPX fell 36.37 points, or 1.78 per cent, to 2,005.52 and the Nasdaq Composite .IXIC shed 79.47 points, or 1.59 per cent, to 4,923.08.

The yen gained after the BoJ merely tweaked its monthly asset-purchase programme. The move halted the dollar’s ascent, fueled in recent months by views that the Fed’s likely decision to raise rates and the BoJ’s path of more potential stimulus would drive investment into higher-yielding U.S. assets.

“The BoJ’s move shows a weak hand,” said Jens Nordvig, global head of FX strategy at Nomura in New York. “It suggests the BoJ is out of ammunition, and will not be able to deliver anything meaningful going forward,” he said.
The dollar, which had hit a more than two-week high of 123.590 yen, fell 1.05 per cent to 121.26 JPY.

The euro rose 0.36 per cent against the dollar at $1.0864 EUR=. The dollar index .DXY, which measures the greenback against a basket of six other major currencies, fell 0.57 percent to 98.704.

Equities suffered from fatigue after markets rose in anticipation of the Fed move, while the slumping price of oil drove investor sentiment on concerns over global growth and a growing supply surplus.

“We had a couple of strong days as a result of the Fed,” said Andrew Wilkinson, chief market strategist at Interactive Brokers LLC in Greenwich, Connecticut.

“The market is getting sucked into a fear trade,” he said. “It’s really oil – is it a glut or a global slowdown? But I don’t think it’s symbolizing a slowdown in the global economy.”

Crude oil resumed its retreat following a rebound of almost one per cent after the U.S. benchmark traded well below $35 a barrel.

The reverse in prices came on news the U.S. oil rig count rose for the first time in five weeks. Seventeen rigs were added in the week ended Friday despite continued weak crude prices, which suggests no end in sight to the supply glut.


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