European stock markets rebound from two-year lows, buoyed by a recovery in banking stocks, while Australia enters bear market territory
The FTSE 100 has bounce back from four-year lows as financial stocks rally. Photo: PA
• Stocks in Asia continue to slide on Wednesday
• Fears over new financial crisis come back to haunt global markets
• Why this market crash is like nothing we've seen before
• FTSE closes at lowest since Aug 2012
• Japan's 10-year bond yields fall below zero for first time ever
• Fears over new financial crisis come back to haunt global markets
• Why this market crash is like nothing we've seen before
• FTSE closes at lowest since Aug 2012
• Japan's 10-year bond yields fall below zero for first time ever
Latest:
13:05
Fed's Janet Yellen must walk 'invisible tightrope' to convince markets that everything is okay
All eyes will turn to US Federal Reserve chairman Janet Yellen to
soothe market nerves, when she begins her testimony in front of the
House Financial Services Committee at 3pm.
Economics correspondent Peter Spence writes:
Breaking the current cycle of financial market anxiety will fall to Federal Reserve chairman Janet Yellen, as she testifies before US politicians today.
The US central bank chief is expected to signal that interest rate rises will occur at a slower pace than policymakers had implied when they gave their forecasts for the trajectory of rates at the end of last year.
To satisfy investors, analysts say that the Fed chairman will need to assure markets that the US economy is strong, but not strong enough to necessitate further rate rises.
The Federal Open Market Committee (FOMC) - which decides on US interest rates - elected to increase the Fed’s main rate by a quarter of a percentage point in December.
The well-trailed move caused little commotion at the time. However, signals from officials that they intended to raise rates a further four times in 2016 have generated no small amount of stress.
Read the full report here
Economics correspondent Peter Spence writes:
Breaking the current cycle of financial market anxiety will fall to Federal Reserve chairman Janet Yellen, as she testifies before US politicians today.
The US central bank chief is expected to signal that interest rate rises will occur at a slower pace than policymakers had implied when they gave their forecasts for the trajectory of rates at the end of last year.
To satisfy investors, analysts say that the Fed chairman will need to assure markets that the US economy is strong, but not strong enough to necessitate further rate rises.
The Federal Open Market Committee (FOMC) - which decides on US interest rates - elected to increase the Fed’s main rate by a quarter of a percentage point in December.
The well-trailed move caused little commotion at the time. However, signals from officials that they intended to raise rates a further four times in 2016 have generated no small amount of stress.
Read the full report here
12:57
Markets extend gains
Just before lunchtime, European stock markets continued to rise ahead of Janet Yellen's Congressional testimony.
Around midday rumours surfaced via a German newsletter that the European Central Bank might buy bank stocks as part of their QE programme; this also lifted markets higher.
Frankfurt's DAX has risen 2.5pc, while the CAC in Paris has advanced 2.4pc and the FTSE 100 is trading up 1.1pc.
Here's a chart of how the German DAX has performed so far today:
Around midday rumours surfaced via a German newsletter that the European Central Bank might buy bank stocks as part of their QE programme; this also lifted markets higher.
Frankfurt's DAX has risen 2.5pc, while the CAC in Paris has advanced 2.4pc and the FTSE 100 is trading up 1.1pc.
Here's a chart of how the German DAX has performed so far today:
12:45
Banking sector soars amid rumours European Central Bank could buy bank stocks
Detutsche Bank has surged by more than 16pc today following a
torrid two days. Confidence across the banking sector is fragile after
stocks slumped earlier this week amid concerns banks may be unable to
repay their debts.
However, the sector has staged quite the comeback today amid rumours that the European Central Bank could buy back bank stocks as part of its quantitative easing programme.
However, the sector has staged quite the comeback today amid rumours that the European Central Bank could buy back bank stocks as part of its quantitative easing programme.
12:36
Shock fall in UK industrial output lays bare plight of sector
Economists warn of more pain ahead, with "no clear indications that the rollercoaster of risks is likely to abate".
Szu Ping Chan writes:
Britain's industrial plight was laid bare today after official figures showed output at the end of 2015 fell faster than at any time over the past three years.
Industrial production contracted by 1.1pc in December from the previous month, the biggest monthly drop since September 2012 and much worse than the 0.1pc decrease expected by economists.
The Office for National Statistics, which compiled the data, said the decline was led by a 5.4pc drop in electricity and gas production, which was hit by the milder weather.
The oil and gas sector, which has struggled amid falling oil prices and high taxes, suffered a 4.6pc decline in output, compared with a month earlier.
Industrial output is now estimated to have contracted by 0.5pc in the final quarter of last year, from a previous forecast of a 0.2pc fall.
Read more here
Szu Ping Chan writes:
Britain's industrial plight was laid bare today after official figures showed output at the end of 2015 fell faster than at any time over the past three years.
Industrial production contracted by 1.1pc in December from the previous month, the biggest monthly drop since September 2012 and much worse than the 0.1pc decrease expected by economists.
The Office for National Statistics, which compiled the data, said the decline was led by a 5.4pc drop in electricity and gas production, which was hit by the milder weather.
The oil and gas sector, which has struggled amid falling oil prices and high taxes, suffered a 4.6pc decline in output, compared with a month earlier.
Industrial output is now estimated to have contracted by 0.5pc in the final quarter of last year, from a previous forecast of a 0.2pc fall.
Read more here
11:28
Four reasons why stock markets have been getting whacked
Economics correspondent Peter Spence writes:
This week has been a rough ride for investors. Losses on equity markets worldwide have driven the FTSE 100 to its lowest levels in three years, as talk of a global downturn has risen to alarming highs.
The strangest thing, however, has not been the retreat in stocks, but the lack of an apparent catalyst. Traders and analysts alike have been scrambling for an explanation. What could have given cause to the ferocious moves?
This week has been a rough ride for investors. Losses on equity markets worldwide have driven the FTSE 100 to its lowest levels in three years, as talk of a global downturn has risen to alarming highs.
The strangest thing, however, has not been the retreat in stocks, but the lack of an apparent catalyst. Traders and analysts alike have been scrambling for an explanation. What could have given cause to the ferocious moves?
- Nerves about China’s economic growth
- Fears of energy sector defaults
- Concerns that the Fed will raise US interest rates too fast
- Worries that banks can not cope with sub-zero interest rates
11:26
Deutsche Bank shares climb as bosses back up tough talk with cash
Tim Wallace writes:
Deutsche Bank’s shares jumped by more than 7pc as markets lapped up reports that the bank is considering buying back some of its bonds in a bid to shore up investor confidence.
Other banks also rallied on the news, with UniCredit soaring 9.4pc, Credit Suisse up 3.4pc and Barclays edging 2.2pc higher.
It comes after two days of rotten trading for the world's biggest lenders, as confidence in the sector slumped over fears that banks might be unable to repay their debts and are headed for another crisis.
Deutsche’s shares have fallen by more than 50pc in the past six months, and by 35pc since the start of 2016.
Read more here
Deutsche Bank’s shares jumped by more than 7pc as markets lapped up reports that the bank is considering buying back some of its bonds in a bid to shore up investor confidence.
Other banks also rallied on the news, with UniCredit soaring 9.4pc, Credit Suisse up 3.4pc and Barclays edging 2.2pc higher.
It comes after two days of rotten trading for the world's biggest lenders, as confidence in the sector slumped over fears that banks might be unable to repay their debts and are headed for another crisis.
Deutsche’s shares have fallen by more than 50pc in the past six months, and by 35pc since the start of 2016.
Read more here
11:10
Southeast Asian stocks mixed at close
Ahead of Janet Yellen's Congressional testimony, stock markets in Southeast Asia had a mixed session today.
Singapore's benchmark Straits Times index closed down 1.6pc, after falling by more than 3pc in intraday trade.
Malaysia's main index fell 1pc, while in Thailand and the Philippines, indices were off by around 0.8pc.
Singapore's benchmark Straits Times index closed down 1.6pc, after falling by more than 3pc in intraday trade.
Malaysia's main index fell 1pc, while in Thailand and the Philippines, indices were off by around 0.8pc.
10:36
Gold retreats from 7 month highs
The price of gold has dipped 1.3pc to $1,181.70 per ounce this
morning as European stock markets climbed, following two straight
sessions of losses.
Investors had flocked to the safe-haven precious metal amid concerns about the tumbling stock markets and the state of the global economy.
However, this morning financial stocks have lifted markets from two-year lows. The DAX is up 2.7pc, while the CAC is 2.3pc higher. The FTSE 100 jumped 1.1pc.
Chris Beauchamp, an IG analyst, said: "It looks increasingly like gold has overreached itself. Having spent two days trying to move on beyond $1200, the rally has apparently spent itself.
"A move below $1180 would open the way to $1170 and down towards the rising daily trendline."
Investors had flocked to the safe-haven precious metal amid concerns about the tumbling stock markets and the state of the global economy.
However, this morning financial stocks have lifted markets from two-year lows. The DAX is up 2.7pc, while the CAC is 2.3pc higher. The FTSE 100 jumped 1.1pc.
Chris Beauchamp, an IG analyst, said: "It looks increasingly like gold has overreached itself. Having spent two days trying to move on beyond $1200, the rally has apparently spent itself.
"A move below $1180 would open the way to $1170 and down towards the rising daily trendline."
10:03
Financial stocks lead FTSE 1.1pc higher
The FTSE 100 snapped its losing streak, after three consecutive trading sessions in the red, helped by financial stocks.
UK-listed banking stocks advanced by more than 1pc this morning, becoming the top sectoral gainer, after they slumped by more than 8pc since Monday amid concerns about the health of the sector.
Mike van Dulken, of Accendo Markets, said: “Equity markets maintaining their ‘recoveries’, as financials regain some poise and bulls have another go at bottom-picking. However, recovery is a big word given the shallow progress by the FTSE and DOW.
"The DAX is the outperformer thanks to a rebound by Deutsche Bank, on whom fears have focused over the last 48 hours."
The top FTSE 100 gainers this morning:
UK-listed banking stocks advanced by more than 1pc this morning, becoming the top sectoral gainer, after they slumped by more than 8pc since Monday amid concerns about the health of the sector.
Mike van Dulken, of Accendo Markets, said: “Equity markets maintaining their ‘recoveries’, as financials regain some poise and bulls have another go at bottom-picking. However, recovery is a big word given the shallow progress by the FTSE and DOW.
"The DAX is the outperformer thanks to a rebound by Deutsche Bank, on whom fears have focused over the last 48 hours."
The top FTSE 100 gainers this morning:
09:56
UK industrial output suffers worst drop since 2012
British industrial output suffered its sharpest drop in December since 2012, official data showed this morning.
The ONS said industrial output fell 1.1pc month-on-month in December. This followed a 0.8pc fall in November.
Sterling dipped following the release of the data to $1.4450 against the dollar, before recovering somewhat.
Here's a chart of GBP, see how it slumps at 9:30am when the ONS releases industrial data for December:
The ONS said industrial output fell 1.1pc month-on-month in December. This followed a 0.8pc fall in November.
Sterling dipped following the release of the data to $1.4450 against the dollar, before recovering somewhat.
Here's a chart of GBP, see how it slumps at 9:30am when the ONS releases industrial data for December:
09:24
European shares rebound from 2-year lows
The recovery in Deutsche Bank shares helped pull European bourses from the doldrums this morning.
European indices have bounced back from two-year lows to make gains more than an hour into trading.
The German DAX has climbed 1.9pc, while the CAC in Paris is also 1.9pc higher and the Spanish IBEX has jumped 2.5pc.
The FTSE 100 is lagging behind its European peers, but it has recovered from an earlier blip, when it fell into negative territory momentarily in early trade.
Britain's blue-chip index is now trading up 1pc.
European indices have bounced back from two-year lows to make gains more than an hour into trading.
The German DAX has climbed 1.9pc, while the CAC in Paris is also 1.9pc higher and the Spanish IBEX has jumped 2.5pc.
The FTSE 100 is lagging behind its European peers, but it has recovered from an earlier blip, when it fell into negative territory momentarily in early trade.
Britain's blue-chip index is now trading up 1pc.
09:10
Shares in Deutsche Bank 10pc higher
After a tumultuous start to the week, shares in Deustche Bank
have bounced by more than 10pc this morning - that's its biggest rally
since October 2011.
The banking stock slumped in recent days amid mounting concerns it will not be able to maintain its bond payments.
However, this morning the German blue-chip stock jumped following reports it isconsidering a multibillion bond buyback in attemtp to aid the plunging value of its securities.
Yesterday, German finance minister Wolfgang Schauble and Deustche's boss John Cryan insisted the bank is "rock solid".
Here's a chart of the pain Deutsche Bank's shares have suffered so far this week:
Tim Wallace writes:
John Cryan, the chief executive of Deutsche Bank, has come out publicly to claim the bank is “rock solid” following a dramatic drop in the troubled German giant’s share price.
The British banker, who only joined Deutsche seven months ago, maintained that there was no reason to panic and called on his staff to spread that message to clients.
“You can tell them that Deutsche Bank remains absolutely rock-solid, given our strong capital and risk position,” he said in a letter to employees.
His plea was followed by Germany’s finance minister Wolfgang Schaeuble who took the unsual step of also trying to reassure investors in the lender. “I have no concerns about Deutsche Bank,” he said.
Read the full report here
The banking stock slumped in recent days amid mounting concerns it will not be able to maintain its bond payments.
However, this morning the German blue-chip stock jumped following reports it isconsidering a multibillion bond buyback in attemtp to aid the plunging value of its securities.
Yesterday, German finance minister Wolfgang Schauble and Deustche's boss John Cryan insisted the bank is "rock solid".
Here's a chart of the pain Deutsche Bank's shares have suffered so far this week:
John Cryan, the chief executive of Deutsche Bank, has come out publicly to claim the bank is “rock solid” following a dramatic drop in the troubled German giant’s share price.
The British banker, who only joined Deutsche seven months ago, maintained that there was no reason to panic and called on his staff to spread that message to clients.
“You can tell them that Deutsche Bank remains absolutely rock-solid, given our strong capital and risk position,” he said in a letter to employees.
His plea was followed by Germany’s finance minister Wolfgang Schaeuble who took the unsual step of also trying to reassure investors in the lender. “I have no concerns about Deutsche Bank,” he said.
Read the full report here
08:58
Goldman Sachs backtracks on 2016 recommendations
We're only six weeks into the new year and already Goldman Sachs
have abandoned five of its six recommended top trades for 2016.
The investment bank was wrong on the dollar versus a basket of euro and yen, yields on Italian bonds versus their German counterparts, US inflation expectations and more.
According to Bloomberg, the bank's chief credit strategist Charles Himmelberg, issued a note to clients yesterday, in which he said:
"Markets have started out this week by aggressively de-risking, apparently owing to fears that the recent slowdown in global growth could descend into recession.
"Financial credit spreads are spiking, especially in Europe, possibly signaling a reactivation of systemic risk concerns."
The move by the bank to close its call for five of its six top picks for the year, adds to concerns the world economy is suffering.
The investment bank was wrong on the dollar versus a basket of euro and yen, yields on Italian bonds versus their German counterparts, US inflation expectations and more.
According to Bloomberg, the bank's chief credit strategist Charles Himmelberg, issued a note to clients yesterday, in which he said:
"Markets have started out this week by aggressively de-risking, apparently owing to fears that the recent slowdown in global growth could descend into recession.
"Financial credit spreads are spiking, especially in Europe, possibly signaling a reactivation of systemic risk concerns."
The move by the bank to close its call for five of its six top picks for the year, adds to concerns the world economy is suffering.
08:39
Yellen set for 'tough examination' from lawmakers
All eyes will be on Federal Reserve chair Janet Yellen's
testimony to US Congress later today. Markets will be looking for
updates on US monetary direction following the recent market turmoil and
the extension of negative rates to Japan.
Rebecca O'Keeffe, of Interactive Investor, said: "Any early movement in markets is, however, just a precursor to this afternoon's main event, billed as possibly the most important debate of the year so far, as Janet Yellen makes her first official public statement since raising rates in December.
"At the House Financial Services Committee today, Janet Yellen can expect a tough examination from lawmakers after the financial carnage that has ensued since the Fed hiked interest rates. Will she insist that the Fed is simply data-dependent, or might there be an acknowledgment that the world simply wasn't ready for higher US interest rates?
"With both the Bank of Japan and European Central Bank still in aggressive easing mode, the Fed appears more isolated than ever in its efforts to normalise US monetary conditions."
Janet Yellen makes her first official public statement since raising rates in December.
Rebecca O'Keeffe, of Interactive Investor, said: "Any early movement in markets is, however, just a precursor to this afternoon's main event, billed as possibly the most important debate of the year so far, as Janet Yellen makes her first official public statement since raising rates in December.
"At the House Financial Services Committee today, Janet Yellen can expect a tough examination from lawmakers after the financial carnage that has ensued since the Fed hiked interest rates. Will she insist that the Fed is simply data-dependent, or might there be an acknowledgment that the world simply wasn't ready for higher US interest rates?
"With both the Bank of Japan and European Central Bank still in aggressive easing mode, the Fed appears more isolated than ever in its efforts to normalise US monetary conditions."
Janet Yellen makes her first official public statement since raising rates in December.08:20
Modest gains in Europe... but for how long?
European stock markets have edged higher this morning, despite sharp losses in Asia overnight.
Frankfurt's DAX inched up 0.4pc, while the French CAC rose 0.2pc and the Spanish IBEX added 0.2pc.
London's FTSE 100 opened 0.3pc higher before turning negative less than 18 minutes into trading. The blue chip index is currently down 0.2pc at 5,622.08.
Mike van Dulken, of Accendo Markets, said: "The positive opening call comes after a break-even US session and despite weakness in Asia where both Japan’s Nikkei and the Aussie ASX dropped into bear market, down 20pc from their last peaks with financials and commodity-linked names under pressure from fears of global recession and another banking sector crisis.
"US indices still volatile with futures doing well this morning, while the longer term downtrend is yet to be threatened. Fears were stoked ever higher yesterday by the banking sector while Iranian chat about oil production cuts buoyed crude prices from lows, but not by much and certainly not enough to help general market sentiment."
Here's a chart of how the FTSE has performed so far this week:
Frankfurt's DAX inched up 0.4pc, while the French CAC rose 0.2pc and the Spanish IBEX added 0.2pc.
London's FTSE 100 opened 0.3pc higher before turning negative less than 18 minutes into trading. The blue chip index is currently down 0.2pc at 5,622.08.
Mike van Dulken, of Accendo Markets, said: "The positive opening call comes after a break-even US session and despite weakness in Asia where both Japan’s Nikkei and the Aussie ASX dropped into bear market, down 20pc from their last peaks with financials and commodity-linked names under pressure from fears of global recession and another banking sector crisis.
"US indices still volatile with futures doing well this morning, while the longer term downtrend is yet to be threatened. Fears were stoked ever higher yesterday by the banking sector while Iranian chat about oil production cuts buoyed crude prices from lows, but not by much and certainly not enough to help general market sentiment."
Here's a chart of how the FTSE has performed so far this week:
08:15
That sinking feeling...Maersk profits dive
It's never good when one of the world's biggest shipping lines
says profits are plunging. That's because container companies like
Moeller-Maersk are widely seen as a bellwether for the global economy.
If things are looking bleak for Maersk, that doesn't bode well for the
rest of us.
The Danish shipping giant said profits plunged 84pc in 2015, after its oil unit was hit by lower energy prices and its container division got squeezed between sluggish trade growth and overcapacity.
Revenue plummeted from $5.02bn in 2014 to just $791m in 2014.
That compares with a median estimate of $3.7bn in a Bloomberg survey of 16 analysts. The result includes a writedown in the value of Maersk’s oil assets by $2.6bn.
Chief executive Nils Smedegaard Andersen said:
Given our expectation that the oil price will remain at a low level for
a longer period, we have impaired the value of a number of Maersk Oil’s
assets. We will continue to strengthen the group’s position through
strong operational performance and growth investments.
In October, Maersk started cost cutting programmes for both of its two biggest units to address what analysts have described as a perfect storm for the conglomerate, which historically has found support from positive market conditions for at least one the two divisions.
The outlook is choppy, too. Underlying profits in 2016 are expectd to be "significantly below" last year’s earnings.
Maersk Oil will report a loss this year, it said. The unit currently breaks even when oil prices are in a range of $45 to $55 a barrel, the company said.
The Danish shipping giant said profits plunged 84pc in 2015, after its oil unit was hit by lower energy prices and its container division got squeezed between sluggish trade growth and overcapacity.
Revenue plummeted from $5.02bn in 2014 to just $791m in 2014.
That compares with a median estimate of $3.7bn in a Bloomberg survey of 16 analysts. The result includes a writedown in the value of Maersk’s oil assets by $2.6bn.
Chief executive Nils Smedegaard Andersen said:
Given our expectation that the oil price will remain at a low level for
a longer period, we have impaired the value of a number of Maersk Oil’s
assets. We will continue to strengthen the group’s position through
strong operational performance and growth investments. In October, Maersk started cost cutting programmes for both of its two biggest units to address what analysts have described as a perfect storm for the conglomerate, which historically has found support from positive market conditions for at least one the two divisions.
The outlook is choppy, too. Underlying profits in 2016 are expectd to be "significantly below" last year’s earnings.
Maersk Oil will report a loss this year, it said. The unit currently breaks even when oil prices are in a range of $45 to $55 a barrel, the company said.
08:05
Are we heading into another major recession?
Maybe. Read this analysis from our friendly market analyst, Michael Hewson, at CMC.
While it is easy to suggest that the current sell-off is an
over-reaction where banks are concerned, confidence is everything, and
as we know from 2008 once it is gone it is very difficult to get back.
With economic growth showing signs of slowing, and interest rates
already at record lows and in some case negative, the capacity for banks
to build up resilience and improve their profitability is becoming that
much more difficult, as central bankers around the world fumble around
in the dark.
The extent of the threat to the banking sectors future profitability can be summed up in one number, $6 trillion, and increasing. This is the value of the number of bonds currently with a negative yield, and a number which has doubled in the last two months alone.
Seeing the current turmoil being wreaked in financial markets surely it is inconceivable that central bankers will continue with a policy that in essence yields no discernible benefit, and simply prompts counter reactions of pass the parcel by central bankers across the world, essentially rendering the whole policy ineffective, but doing enormous damage to long-term savers and pension funds.
While it is easy to suggest that the current sell-off is an
over-reaction where banks are concerned, confidence is everything, and
as we know from 2008 once it is gone it is very difficult to get back.
With economic growth showing signs of slowing, and interest rates
already at record lows and in some case negative, the capacity for banks
to build up resilience and improve their profitability is becoming that
much more difficult, as central bankers around the world fumble around
in the dark. The extent of the threat to the banking sectors future profitability can be summed up in one number, $6 trillion, and increasing. This is the value of the number of bonds currently with a negative yield, and a number which has doubled in the last two months alone.
Seeing the current turmoil being wreaked in financial markets surely it is inconceivable that central bankers will continue with a policy that in essence yields no discernible benefit, and simply prompts counter reactions of pass the parcel by central bankers across the world, essentially rendering the whole policy ineffective, but doing enormous damage to long-term savers and pension funds.
07:50
Another battering for Asian markets
Asian stock markets have suffered another beating, with Japan's
Nikkei index reporting sharp losses as investors grew increasingly
concerned about the state of the world's economy, the health of the
banking system and the prospect of another global recession.
The Nikkei index lost 2.3pc to close at its lowest level since October 2014, extending the 5.4pc collapse on Tuesday.
Sydney ended the day down 1.2pc, while Singapore, returning from a two-day holiday, sank 2.1pc in the afternoon. Markets in New Zealand, the Philippines and India also dipped into the red.
Once again, energy firms lost out after oil prices sank below $28 a barrel yesterday, although Brent crude appears to be staging a bit of a comeback this morning.
Among energy stocks, miner BHP Billiton lost 2.5pc of its value, while JX Holdings in Tokyo was down more than 2pc.
Asia's banks also took a beating, following losses in their European counterparts.
Market turbulence is at a five-month high, having jumped 20pc since last Friday, according to the Chicago Board Options Exchange Volatility Index.
The Nikkei index lost 2.3pc to close at its lowest level since October 2014, extending the 5.4pc collapse on Tuesday.
Sydney ended the day down 1.2pc, while Singapore, returning from a two-day holiday, sank 2.1pc in the afternoon. Markets in New Zealand, the Philippines and India also dipped into the red.
Once again, energy firms lost out after oil prices sank below $28 a barrel yesterday, although Brent crude appears to be staging a bit of a comeback this morning.
Among energy stocks, miner BHP Billiton lost 2.5pc of its value, while JX Holdings in Tokyo was down more than 2pc.
Asia's banks also took a beating, following losses in their European counterparts.
Market turbulence is at a five-month high, having jumped 20pc since last Friday, according to the Chicago Board Options Exchange Volatility Index.
06:43
Summary
- The FTSE slumped to its lowest level since August 2012 on Tuesday and European equities sold off as markets endured another day of turmoil.
- Europe's Stoxx 600 index of banks also fell to its lowest level since August 2012, losing another 5.6pc.
- The rout continued on Wednesday in Japan, where the Nikkei dropped 2.3 percent.
- Australia entered a bear market, with the S&P/ASX 200 Index dropping to its lowest since July 2013.
- Investors will be watching closely what Federal Reserve Chair Janet Yellen says before the US Congress on Wednesday.
06:35
Japan 'suffering triple punch'
Japanese stocks have plunged for a second day as investors rushed to the safety of the yen.
The Topix index sank 3 percent to 1,264.96 at the close in Tokyo, capping the biggest two-day loss since August and lowest close since October 2014, Bloomberg reported. It pared a loss of as much as 4.4 percent in late trading. The Nikkei 225 Stock Average dropped 2.3 percent to 15,713.39, triggering margin calls among retail traders. The yen traded at 114.66 per dollar, near the strongest since November 2014. Markets in Japan are closed Thursday for a holiday.
Tomoichiro Kubota, a senior analyst at Matsui Securities Co. in Tokyo, told Bloomberg:
Japanese
stocks are suffering from a triple punch and it’s difficult to bounce
back. We have worries over financial institutions in Europe, problems in
the bond market, and concerns aren’t alleviated at all. There’s still a
sense of wariness toward commodity-related corporate earnings in the
US, so that’s a negative, plus the yen is being favoured as a place of
refuge.
The Topix index sank 3 percent to 1,264.96 at the close in Tokyo, capping the biggest two-day loss since August and lowest close since October 2014, Bloomberg reported. It pared a loss of as much as 4.4 percent in late trading. The Nikkei 225 Stock Average dropped 2.3 percent to 15,713.39, triggering margin calls among retail traders. The yen traded at 114.66 per dollar, near the strongest since November 2014. Markets in Japan are closed Thursday for a holiday.
Tomoichiro Kubota, a senior analyst at Matsui Securities Co. in Tokyo, told Bloomberg:
Japanese
stocks are suffering from a triple punch and it’s difficult to bounce
back. We have worries over financial institutions in Europe, problems in
the bond market, and concerns aren’t alleviated at all. There’s still a
sense of wariness toward commodity-related corporate earnings in the
US, so that’s a negative, plus the yen is being favoured as a place of
refuge. 06:05
Australia enters bear market
Volatility in the markets has extended to Australia, where stocks have sank to a bear market.
The S&P/ASX 200 Index dropped 1.2 percent to close at 4,775.70, its lowest since July 2013, according to Bloomberg. The gauge has tumbled 20 percent from its April peak, the level some traders define as a bear market. Markets from Europe to Japan and China have already fallen into this category.
“There’s a sense of heightened global uncertainty, with more question marks around global growth,” Chris Green, an Auckland-based strategist at First NZ Capital Group Ltd., a brokerage and wealth management firm, told Bloomberg. “There seems to be policy fatigue among central banks and there’s a realisation from investors that the risks to global growth have increased.”
Australian shares have fallen amid concerns about China?s economy and tumbling commodity prices.
The S&P/ASX 200 Index dropped 1.2 percent to close at 4,775.70, its lowest since July 2013, according to Bloomberg. The gauge has tumbled 20 percent from its April peak, the level some traders define as a bear market. Markets from Europe to Japan and China have already fallen into this category.
“There’s a sense of heightened global uncertainty, with more question marks around global growth,” Chris Green, an Auckland-based strategist at First NZ Capital Group Ltd., a brokerage and wealth management firm, told Bloomberg. “There seems to be policy fatigue among central banks and there’s a realisation from investors that the risks to global growth have increased.”
Australian shares have fallen amid concerns about China?s economy and tumbling commodity prices.04:40
Japan's slump continues
Tokyo stocks are continuing to fall, with shares plunging more than 3 percent in afternoon trading on Wednesday.
The benchmark Nikkei 225 index tumbled 3.42 percent, or 550.74 points, to 15,534.70, after a 5.4 percent dive the previous day. The broader Topix index of all first-section shares fell 3.64 percent, or 47.52 points, to 1,256.81.
Chihiro Ohta, general manager of investment information at SMBC Nikko Securities, told Bloomberg News the volatility was expected to continue:
The
market is waiting to see what (Federal Reserve Chair Janet) Yellen will
say in her testimony on rate hikes given the situation we're in.
The benchmark Nikkei 225 index tumbled 3.42 percent, or 550.74 points, to 15,534.70, after a 5.4 percent dive the previous day. The broader Topix index of all first-section shares fell 3.64 percent, or 47.52 points, to 1,256.81.
Chihiro Ohta, general manager of investment information at SMBC Nikko Securities, told Bloomberg News the volatility was expected to continue:
The
market is waiting to see what (Federal Reserve Chair Janet) Yellen will
say in her testimony on rate hikes given the situation we're in. 03:23
All eyes on Yellen
Federal Reserve Chair Janet Yellen will be testifying before the
US Congress later on Wednesday and she will need to calibrate her
commentary carefully to avoid further stoking volatility.
With equity markets lurching between selloffs and rebounds amid concern over the creditworthiness of European banks and the impact of oil’s decline, investors will be firmly focused on Ms Yellen, after the Bank of Japan’s surprise move into negative interest rates largely failed to assuage market concerns.
Analysts have started to examine the prospect of the US following the euro area and Japan in adopting rates below zero if the economy deteriorates. According to Steven Englander, Citigroup’s New York-based global head of Group-of-10 currency strategy, Ms Yellen should “deflate” some of the enthusiasm around negative rates and that may boost US yields and support the dollar:
Her
hope would be to unwind some of the bearishness that has engulfed asset
markets, and this would be supportive for U.S. dollar, rates and
equities. However, at times market pessimism is so deep seated that good
news is viewed only as an opportunity to sell at better levels.
The dollar dropped 0.6 percent to 114.38 yen as of 10:44 a.m. in Tokyo after falling to 114.21 Tuesday, the weakest level since November 2014.
Janet Yellen will testify before Congress on Wednesday. Photo: Bloomberg
With equity markets lurching between selloffs and rebounds amid concern over the creditworthiness of European banks and the impact of oil’s decline, investors will be firmly focused on Ms Yellen, after the Bank of Japan’s surprise move into negative interest rates largely failed to assuage market concerns.
Analysts have started to examine the prospect of the US following the euro area and Japan in adopting rates below zero if the economy deteriorates. According to Steven Englander, Citigroup’s New York-based global head of Group-of-10 currency strategy, Ms Yellen should “deflate” some of the enthusiasm around negative rates and that may boost US yields and support the dollar:
Her
hope would be to unwind some of the bearishness that has engulfed asset
markets, and this would be supportive for U.S. dollar, rates and
equities. However, at times market pessimism is so deep seated that good
news is viewed only as an opportunity to sell at better levels. The dollar dropped 0.6 percent to 114.38 yen as of 10:44 a.m. in Tokyo after falling to 114.21 Tuesday, the weakest level since November 2014.
Janet Yellen will testify before Congress on Wednesday. Photo: Bloomberg03:06
Asian stocks slide
Markets are continue to tumble in Asia amid persistent concern over market volatility,
In Japan, the Nikkei index lost 2.4 percent by the break, extending the 5.4 percent collapse on Tuesday, as the yen climbed against the dollar to levels not seen since late 2014. The Topix fell 2.6 percent - its lowest point since October 2014. Singapore's Straits Times gauge slipped 2.1 percent, its biggest drop in three weeks, while in Australia the S&P/ASX 200 Index dropped 2.3 percent, extending losses at its lowest level since July 2013.
Explaining the markets' slide, Russ Koesterich, global chief investment strategist for New York-based BlackRock Inc, told Bloomberg TV:
Having
a large impact on the drop in equities is this growing concern about
the sustainability of the recovery, the state of economic growth in
China and, increasingly, the state of growth in the US. People are
getting worried about the global recession, worried about growth, which
is affecting not only oil and stocks but other risky assets as well.
In Japan, the Nikkei index lost 2.4 percent by the break, extending the 5.4 percent collapse on Tuesday, as the yen climbed against the dollar to levels not seen since late 2014. The Topix fell 2.6 percent - its lowest point since October 2014. Singapore's Straits Times gauge slipped 2.1 percent, its biggest drop in three weeks, while in Australia the S&P/ASX 200 Index dropped 2.3 percent, extending losses at its lowest level since July 2013.
Explaining the markets' slide, Russ Koesterich, global chief investment strategist for New York-based BlackRock Inc, told Bloomberg TV:
Having
a large impact on the drop in equities is this growing concern about
the sustainability of the recovery, the state of economic growth in
China and, increasingly, the state of growth in the US. People are
getting worried about the global recession, worried about growth, which
is affecting not only oil and stocks but other risky assets as well. 21.31
Dow and S&P 500 close lower
US stocks finished a choppy session slightly lower as investors
grappled with weakness in overseas equity markets and another drop in
oil prices.
At the closing bell, the Dow Jones Industrial Average and S&P 500 were both down 0.05pc, while the tech-rich Nasdaq Composite Index lost 0.36pc.
"The market is trying to find a floor," said Alan Skrainka, chief investment officer at Cornerstone Wealth Management.
"We still believe this volatility is going to continue until commodity prices settle down, and that hasn't happened yet."
Concerns over the health of global banks also weighed on markets.
John Cryan, the chief executive of Deutsche Bank, was forced to publicly claim the bank is “rock solid” following a dramatic drop in the troubled German giant’s share price.
The British banker, who only joined Deutsche seven months ago, maintained that there was no reason to panic and called on his staff to spread that message to clients.
“You can tell them that Deutsche Bank remains absolutely rock-solid, given our strong capital and risk position,” he said in a letter to employees.
His plea was followed by Germany’s finance minister Wolfgang Schaeuble who took the unsual step of also trying to reassure investors in the lender. “I have no concerns about Deutsche Bank,” he said.
Shares in Deutsche tumbled another 4.7pc on Tuesday. The bank’s shares fell to €13.26 and are now down 46pc since the start of the year and 58pc in the last six months. Last month the bank reported a €6.8bn (£5.3bn) loss for 2015.
Deutsche has led the wider banking market down as fears spread over the profitability and financial stability of Germany’s biggest bank. Yesterday Swiss institution Credit Suisse’s shares were down by almost as much, plunging 7.75pc. Spooked investors also sold off shares in other banks, leaving Barclays down 5.2pc, BNP Paribas down 4.8pc and Italy’s Intesa Sanpaolo down 4.9pc.
At the closing bell, the Dow Jones Industrial Average and S&P 500 were both down 0.05pc, while the tech-rich Nasdaq Composite Index lost 0.36pc.
"The market is trying to find a floor," said Alan Skrainka, chief investment officer at Cornerstone Wealth Management.
"We still believe this volatility is going to continue until commodity prices settle down, and that hasn't happened yet."
Concerns over the health of global banks also weighed on markets.
John Cryan, the chief executive of Deutsche Bank, was forced to publicly claim the bank is “rock solid” following a dramatic drop in the troubled German giant’s share price.
The British banker, who only joined Deutsche seven months ago, maintained that there was no reason to panic and called on his staff to spread that message to clients.
“You can tell them that Deutsche Bank remains absolutely rock-solid, given our strong capital and risk position,” he said in a letter to employees.
His plea was followed by Germany’s finance minister Wolfgang Schaeuble who took the unsual step of also trying to reassure investors in the lender. “I have no concerns about Deutsche Bank,” he said.
Shares in Deutsche tumbled another 4.7pc on Tuesday. The bank’s shares fell to €13.26 and are now down 46pc since the start of the year and 58pc in the last six months. Last month the bank reported a €6.8bn (£5.3bn) loss for 2015.
Deutsche has led the wider banking market down as fears spread over the profitability and financial stability of Germany’s biggest bank. Yesterday Swiss institution Credit Suisse’s shares were down by almost as much, plunging 7.75pc. Spooked investors also sold off shares in other banks, leaving Barclays down 5.2pc, BNP Paribas down 4.8pc and Italy’s Intesa Sanpaolo down 4.9pc.
18.30
Tuesday's market wrap
The FTSE slumped to its lowest level since August 2012 and
European equities sold off as markets endured another day of turmoil
driven by worries a new banking crisis could erupt in a fragile global
economy.
Britain's benchmark blue-chip index ended the day down 1pc to close at 5632 points, it lowest finish in more than three years.
In Europe, the pan-European FTSE Eurofirst endured its seventh consecutive day of declines, falling by as much as 2.6pc in intraday trading.
European banks were the biggest casualties with another 4.5pc wiped off the Euro Stoxx 600. The index has now fallen to its lowest point since the height of the eurozone turmoil in the summer of 2012 when investors were forced to take a "haircut" on Greek government debt.
Western markets were gripped by risk-off sentiment after Japan's Nikkei has closed down 5.5pc, and Asian banks declined by 7pc, in early morning trading.
Japan also became the first major world economy to see borrowing costs on its 10-year bonds fall into negative territory - effectively penalising investors for holding government debt.
The flight to safety was triggered by a heady mix of fears - including concerns that central banks were stoking a new crisis by embarking on an unprecedented experiment with negative interest rates.
"[Monetary policy] is trying to stimulate aggregate demand and the honest truth is that it's not capable of doing that in a sustainable way", said William White at the Organisation of Economic Cooperation and Development.
Perennial concerns about an oil glut also sent Brent crude down by 2.2pc to as low as $32 a barrel.
Evidence of a dramatic slowdown Germany only piled onto woes that the world would struggle to get out of an insipid growth trap this year. German industrial production fell by 1.2pc at the end of last year, it sharpest fall since August 2014.
• Read all of the news as it happened on Tuesday, February 9
Britain's benchmark blue-chip index ended the day down 1pc to close at 5632 points, it lowest finish in more than three years.
In Europe, the pan-European FTSE Eurofirst endured its seventh consecutive day of declines, falling by as much as 2.6pc in intraday trading.
European banks were the biggest casualties with another 4.5pc wiped off the Euro Stoxx 600. The index has now fallen to its lowest point since the height of the eurozone turmoil in the summer of 2012 when investors were forced to take a "haircut" on Greek government debt.
Western markets were gripped by risk-off sentiment after Japan's Nikkei has closed down 5.5pc, and Asian banks declined by 7pc, in early morning trading.
Japan also became the first major world economy to see borrowing costs on its 10-year bonds fall into negative territory - effectively penalising investors for holding government debt.
The flight to safety was triggered by a heady mix of fears - including concerns that central banks were stoking a new crisis by embarking on an unprecedented experiment with negative interest rates.
"[Monetary policy] is trying to stimulate aggregate demand and the honest truth is that it's not capable of doing that in a sustainable way", said William White at the Organisation of Economic Cooperation and Development.
Perennial concerns about an oil glut also sent Brent crude down by 2.2pc to as low as $32 a barrel.
Evidence of a dramatic slowdown Germany only piled onto woes that the world would struggle to get out of an insipid growth trap this year. German industrial production fell by 1.2pc at the end of last year, it sharpest fall since August 2014.
• Read all of the news as it happened on Tuesday, February 9
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