US stocks were bracing for a rocky trading day Tuesday, with stock futures and currencies swinging as a renewed plunge in oil prices and an epic collapse in the Russian ruble stoke fears of contagion in other markets.
Investors piled into havens securities, such as Treasurys and Japanese yen, sending both higher.
The yield on the 10-year Treasury dropped seven basis points, while the yen rose against the dollar to ¥116, just a day ahead of the conclusion of the Federal Open Market Committee meeting, which promises to offer clues about when rate hikes will begin amid the rout in oil and the ruble, MarketWatch reported.
Concerns about the story playing out in Russia and global markets amid oil’s continued decline overshadowed weaker-than-expected housing data.
Construction started on new US homes declined 1.6% in November, led down by single-family homes, signaling some market shakiness, according to government data released Tuesday.
Futures, which started with a slight gain, dropped sharply, but were off session lows shortly before the opening bell. Futures for the S&P 500 index shed 9 points, or 0.5%, to 1,974.10, while those for the Dow industrials slid 52 points, or 0.3%, to 17,070. Futures for the Nasdaq-100 index tumbled 28.75 points, or 0.7%, to 4,131.50.
Russia’s main stock index slumped 14% after the country’s central bank hiked interest rates to 17% from 10.5% late Monday, in a bid to stem the ruble’s decline. Sellers dug into the Russian currency after a brief respite and the pair shot past 72 rubles.
Russia contributes just a small slice to global growth, but the situation still has some worried. “When a central bank decides to trade financial stability for a recession and fails within 12 hours, that is pretty serious,” said Wouter Sturkenboom, strategist at Russell Investments in London.
Manufacturing activity in China contracted this month for the first time since May, according to HSBC’s preliminary monthly Purchasing Managers Index, released Tuesday. That data helped drive January Brent crude below $60 a barrel — levels not seen since July 2009.
Data showing improvement in eurozone private sector activity initially provided a thin layer of stabilization for oil and European stocks though those gains did not last. Data readings for Germany were mixed, though a ZEW survey showed financial experts are more confident about Germany’s prospects than expected.
Stocks in Dubai slid 7%, while in Qatar fell 3.7% slid to a six-week low. The British pound fell 0.6% to $1.5731 after UK inflation hit its lowest since September 2002.
