Turmoil returned to global markets as oil plunged and European stocks sank to the lowest levels in 13 months, fueling a rush into haven assets.
Earnings exacerbated the rout, sending MSCI Inc.’s gauge of global equities to the brink of a bear market. Russia’s ruble and Mexico’s peso fell to record lows, while bets mounted on an end to Hong Kong’s dollar peg. Yields on 10-year treasuries dropped below 2% and the yen jumped to a one-year high, Bloomberg reported.
Oil’s slump to a 12-year low is ripping through markets. Just on Wednesday, Royal Dutch Shell Plc said profit may drop at least 42% in the fourth quarter and Saudi Arabia was said to order a halt in selling options used to bet against its currency peg. US bonds now predict the slowest inflation since May 2009. A report on Thursday will probably show US crude stockpiles expanded, exacerbating the global glut.
Stocks, Bonds
The Stoxx Europe 600 Index tumbled 3.1% in New York, with all industry groups declining. The MSCI All-Country World Index retreated 1.3%, extending its drop from a May high to 18.7%, nearing the 20% threshold for a bear market. More than $15 trillion has been erased from the value of global equities in the period, according to data compiled by Bloomberg.
Shell slid 5.5% and BHP Billiton Ltd. dragged commodity producers lower, falling 6.9% after trimming its full-year iron ore output forecast. Zurich Insurance Group AG declined 8.7% after forecasting a second straight quarterly loss for its biggest unit. Standard & Poor’s 500 Index futures slid 1.9%.
Treasuries climbed, pushing 10-year yields to the lowest since October, as investors sought the safety of sovereign debt. The benchmark 10-year note yield fell eight basis points to 1.98%, according to Bloomberg Bond Trader data. That’s the biggest drop since Dec. 11.
Emerging Markets
The MSCI Emerging Markets Index dropped the most in two weeks, sinking 2.9% to the lowest on a closing basis since May 2009. The gauge is down more than 12.7% this year, the worst start since records began in 1988.
Hong Kong’s Hang Seng China Enterprises Index tumbled 4.2% as oil producers plummeted and a drop in the city’s dollar spurred concern over capital outflows. The Shanghai Composite Index slipped 1%.
Russia’s Micex Index slid 1.7% and the Bloomberg (P)GCC 200 Index of equities in Persian Gulf Arab markets lost 3.2%. Saudi Arabia’s Tadawul All Share Index declined 4.5% and Dubai shares sank 4.6%. Egypt’s benchmark slid 4.5%.
Currencies Weaken
Russia’s ruble weakened as much as 2% to a record 80.18 against the dollar. The Mexican peso fell to a record 18.48 per dollar and is down 6.5% this year, making it Latin America’s worst performing major currency.
Hong Kong’s dollar traded near its weakest level since 2007 and forwards contracts sank as China’s market turmoil fueled speculation the city’s 32-year-old currency peg will end. Contracts to buy the currency in 12 months fell as much as 0.3% to HK$7.89 per dollar, beyond the HK$7.75-HK$7.85 range that it can trade within under the existing exchange-rate system. The spot rate dropped to as low as HK$7.82, within 0.35% of the weak end of its band.
The yen strengthened 1.3% to 116.09 per dollar, and touched 115.98, the strongest level since Jan. 16, 2015. Japan’s currency appreciated 0.9% to 127.19 per euro. The euro climbed 0.5% to $1.09. The Australian dollar slid 0.9% to 68.45 US cents, extending this year’s decline to 6.1%. The kiwi touched the weakest level since Sept. 30.
