Global stocks dropped, European shares suffered the biggest two-day slump since 2008 and oil sank below $80 a barrel on concern the U.S. recovery is faltering and Europe’s debt crisis will worsen. The Swiss franc gained, while gold reached a record high.
The MSCI All-Country World Index declined 1.2 percent at 10:28 a.m. in London. The Stoxx Europe 600 Index lost 1.9 percent, paring declines of as much as 3.6 percent. Standard & Poor’s 500 Index futures slipped 1.3 percent. Oil dropped 2 percent and gold topped $1,850 an ounce for the first time. The franc strengthened against all of its 16 major peers. Ten-year German bunds reversed earlier gains, sending the yield two basis points higher to 2.11 percent.
More than $6 trillion has been erased from the value of global equities this month on signs the U.S. recovery is stumbling, while the cost of insuring European sovereign debt is back to levels that triggered the region’s central bank to buy Italian and Spanish bonds on Aug. 8. Citigroup Inc. cut its forecasts for the world’s largest economy, while Morgan Stanley lowered targets for stock indexes in Indonesia and Singapore.
“Fear is breeding fear now,” said Nader Naeimi, a Sydney- based strategist for AMP Capital Investors Ltd., which manages almost $100 billion. “There’s a total lack of confidence in policy makers’ ability to defuse the situation.”
All but 54 of the Stoxx 600’s members fell as the gauge headed for the lowest close in two years. Daimler AG and Bayerische Motoren Werke AG led a decline in automakers, sliding more than 3 percent. Technology shares were the only industry group among 19 in the Stoxx 600 to gain, as Autonomy Corp. surged 75 percent after the U.K. software company agreed to be bought by Hewlett-Packard Co. for $10.3 billion.
The franc appreciated 0.5 percent against dollar and rose 0.6 percent versus the euro, heading for the biggest weekly gain against the single currency since the week ended July 1. The yen rose against the dollar and the euro even after Finance Minister Yoshihiko Noda signaled he’s ready to make an intervention in the market to curb its gains. The yen rose 0.2 percent against the dollar and 0.4 percent versus the euro.
Treasuries gave up some of yesterday’s gains that sent yields to record lows. The 30-year yield was little changed at 3.43 percent. The extra yield investors demand to hold U.S. 30- year bonds instead of two-year notes was at 323 basis points, matching the lowest since September last year, as concern on economic growth deepened. The narrowing spread signals investor preference for the longer-maturity paper, which is more sensitive to the outlook for inflation.
The dollar Libor-OIS spread, a gauge of banks’ reluctance to lend, was at 21 basis points, less than one basis point from the highest level since August last year.
Emerging-market stocks fell for a second day, putting the benchmark index on course for a fourth straight week of losses. The MSCI Emerging Markets Index lost 2.1 percent, bound for the lowest close since August 2010. South Korea’s Kospi Index (KOSPI) sank 6.2 percent, the steepest drop since November 2008, while Taiwan’s Taiex index plunged 3.6 percent. India’s Bombay Stock Exchange Sensitive Index lost 2.4 percent. Bourses dropped at least 2.9 percent in Hungary, Turkey and Russia.
The Turkish lira fell for a second day, hitting the lowest level since March 2009, on speculation that a global slowdown will prompt the central bank to cut rates next week.
The S&P GSCI index of 24 commodities declined 1.3 percent and is down 0.8 percent this year. Gold for immediate delivery jumped to $1,862.73 an ounce after trading at the record $1,867.95 earlier today.