Stocks tumbled around the world yesterday, with US equities headed for their lowest levels in 15 months, and bonds and gold jumped as oil’s plunge below $30 sent markets reeling.
Treasuries extended gains as economic data and earnings added to concern that global growth is faltering.
The Dow Jones Industrial Average sank 450 points, European stocks fell into a bear market and the Shanghai Composite Index wiped out gains from an unprecedented state-rescue campaign as global equities added to the worst start to a year on record.
Oil touched $29.28 a barrel as Iran prepares to export into a global supply glut.
A measure of default risk for junk-rated US companies surged to the highest in three years.
Yields on 10-year Treasury notes dipped under 2% as doubts grow that the Federal Reserve will raise interest rates. Gold surged 1.6% with the yen on haven demand.
Crude’s drop to a 12-year low is sending shock waves around the world at the same time concern is mounting that China’s policy interventions will fall short of stoking growth in the world’s second-largest economy.
Energy firms are laying off workers and currency markets from commodity-producing countries are in turmoil. The slump is also denting the outlook for inflation around the world, causing traders to curb bets on how far the Federal Reserve will raise interest rates this year.
“Markets have to go through several stages and right now they’re just holding their head and crying,” Krishna Memani, chief investment officer at Oppenheimer Funds Inc. in New York, said by phone.
“The drama and issue overnight is more related to oil prices not finding a floor. If it was just China and everything else was OK, we’d see through that. But when China is down and oil drops everyday, the market recognises it has substantial issues.”
West Texas Intermediate crude fell as much as 6.2 percent, before trading 5.8 percent lower at $29.40 a barrel. Brent fell 3.9 percent to $29.69 a barrel.
International sanctions on Iran may be lifted Monday, allowing for a boost in oil shipments from the fifth-biggest member of the Organization of Petroleum Exporting Countries.
Oil will turn into a new bull market before the year is out as the price rout shuts down production, putting the U.S. shale- oil boom into reverse in the second half of the year, according to Goldman Sachs Group Inc.
As US production slumps by 575,000 barrels a day, global oil markets will tip from surplus to deficit, the bank said in a report
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