Global stocks tumble as Wall Street braces for more losses

The Dow Jones industrial average posted its biggest percentage decline since August 2011

(Canadian Press photo)

Stock markets around the world took a battering Tuesday, following a dramatic sell-off on Wall Street that triggered concerns that a potentially healthy pullback from record highs could turn into a bear market.

Hopes that Wall Street won’t repeat the scale of Monday’s losses helped limit the selling during European trading hours. Futures markets suggested another, but more limited drop, in the U.S., with the Dow and S&P 500 futures down 0.9 per cent and 0.5 per cent.

The drop, which gathered pace Monday when the Dow Jones industrial average posted its biggest percentage decline since August 2011, has been fueled by fears the U.S. Federal Reserve will raise interest rates faster than expected due to a pick-up in wages.

That has fed into widespread concerns that markets were stretched following a strong run over the past year that pushed many indexes to record highs. Some also questions the possible role of computer-driven algorithmic trading in the precipitous declines.

“If investors look at underlying earnings growth and the fundamentals of the global economy, there is reason for optimism,” said Neil Wilson, senior market analyst at ETX Capital.

“However once this kind of stampede starts it’s hard to stop.”

Among the biggest fallers on Tuesday was Tokyo’s Nikkei 225 stock average, which ended 4.7 per cent lower at 21,610.24, having earlier been down a massive 7 per cent. All other Asian markets tanked, too, including the Shanghai Composite index, which closed 3.4 per cent lower at 3,370.65 and Hong Kong’s Hang Seng, which skidded 5.1 per cent to 30,595.42. Australia’s benchmark S&P ASX 200 slid 3.2 per cent to 5,833.30 and South Korea’s Kospi declined 1.5 per cent to 2,453.31.

The selling persisted into European trading hours, though at a more moderate pace. The FTSE 100 index of leading British shares was 2.3 per cent lower at 7,170 while the CAC 40 in France fell 2.2 per cent to 5,171. Germany’s DAX was down 2.1 per cent at 12,423.

Though many stock indexes are close to where they started the year, the losses mark a major reverse following a sustained period of gains, a pullback that market pros have been predicting for some time.

Stephen Schwarzman, the chairman and CEO of financial firm Blackstone, warned recently of a potential “reckoning” in markets.

A 10 per cent drop from a peak is often referred to as a “correction” while a bear market is generally defined as a 20 per cent or so drop in indexes. The S&P 500, for example, has fallen 7.8 per cent since it set its latest record high on Jan. 26.

“Seemingly the only hope for the markets at the moment is that investors suddenly decide that the sell-off has been a bit overdone,” said Connor Campbell, a financial analyst at Spreadex.

Despite the sea of red in global stock markets, there are hopes that the retreat won’t last long given that global economic growth has picked up and the financial system is more robust since the financial crisis.

“That is not to say that we won’t see further falls in coming days, but in an environment where growth is good and earnings are expected to rise globally, there are decent underpinnings,” said James Knightley, chief international economist at ING.

The catalyst for the latest sell-off came in jobs figures last Friday showing that wage growth in the U.S. was creeping higher. For many traders, that was a sign that the Fed will have to pick up the pace of its rate hikes — higher wages have the capacity to fuel inflation.

On Monday, the Dow finished down 4.6 per cent at 24,345.75, while the S&P 500 sank 4.1 per cent, to 2,648.94. Falls like this have not been registered since August 2011 when investors were fretting over Europe’s debt crisis and the debt ceiling impasse in Washington that prompted a U.S. credit rating downgrade.

Still, while some financial assets became more attractive to investors as perceived havens of value. Gold, for example, was up 0.5 per cent at $1,343 an ounce.

The U.S. dollar remained resilient despite the stock market sell-off, which at one stage Monday saw the Dow shed 1,597 points. The euro was up 0.4 per cent at $1.2415 while the dollar rose 0.1 per cent to 109.22 yen.

____

Kurtenbach contributed from Tokyo. Rod McGuirk in Canberra, Australia, and Mari Yamaguchi in Tokyo also contributed to this report.

Pan Pylas And Elaine Kurtenbach, The Associated Press

Just Posted

Canadian Armed Forces to conduct search and rescue exercises around Tofino

Don’t be alarmed if you see military aircraft from Sunday, Feb. 25 until Thursday, March 1.

Adopted pet pig gets killed and eaten

Animal was adopted out by SPCA staff in the Cowichan Valley

Gardening event in Ucluelet this weekend

Feb. 25 event include deer-proofing tips.

Tofino and Ucluelet cheer new Airbnb tax agreement

“This is a good and necessary step for the government to take.”

Food Bank on the Edge Society seeks safer location

Facility serves Ucluelet, Tofino and surrounding communities.

The 2018 B.C. Games wrap up in Kamloops

The B.C. Winter Games comes to a close after a weekend of fun and excitment

How to keep local news visible in your Facebook feed

Facebook has changed the news feed to emphasize personal connections. You might see less news.

B.C. boosts support for former youth in government care

More support coming for rent, child care and health care while they go back to school

Concert-goers unfazed by Hedley sexual misconduct allegations

Frontman Jacob Hoggard thanked fans from the ‘bottom of our hearts’ at Halifax’s Scotiabank Centre

Original B.C. Games participant-turned-sensei officiating 39 years later

Langley judo sensei was a competitor at the inaugural B.C. Winter Games 40 years ago

Police watchdog probes B.C. man’s taser death in alleged parental child abduction

Independent Investigations Office called in after one male dies

PHOTOS: Harnessing diverse abilities on the court at the B.C. Games

Basketball is one of two Special Olympics events at the B.C. Winter Games in Kamloops

B.C. VIEWS: Our not-so-New Democrats don’t rock the boat

Finance Minister Carole James takes the wheel, steers similar course

OLYMPIC ROUNDUP: Canadians all smiles after record medal haul

Team Canada is taking home a record 29 medals from Pyeongchang – 11 gold, eight silver, 10 bronze

Most Read