Yellen inspires fresh rout on global stock markets

World stock markets slumped Thursday, gripped by yet another fierce sell-off after a warning by Federal Reserve boss Janet Yellen over the global economy, while oil fell close to 12-year lows.

New York’s Dow Jones Industrial Average sank overnight as Yellen also appeared to play down the chances of another US interest rate hike any time soon.

The news sparked a renewed sell-off in Asia on Thursday, with Hong Kong stocks tumbling as investors also played catch-up after a three-day break for the Chinese New Year.

The intense selling spilled over into Europe, with Amsterdam shedding six percent and Milan diving five percent in morning deals, while Paris lost almost four percent.

Frankfurt and Madrid stocks shed more than three percent, while London dipped 2.7 percent.

– ‘Panic on Europe’s doorstep’ –

“The Fed chair inspired a wave of panic late in the American session that has fed through Asia and turned up on Europe’s doorstep,” Spreadex analyst Connor Campbell told AFP.

He added that “a lack of sufficient dovishness paired with gloomy comments on the global outlook” had reignited investors’ recession fears.

In commodity markets, New York crude oil collapsed close to a 12-year low underneath $27 per barrel, plagued also by chronic oversupply.

Sentiment soured further as Australian mining giant Rio Tinto posted an annual net loss of US$866 million (768 million euros) and blamed the “highly challenging environment” as commodity prices plunge and China’s economic slowdown bites.

Dealers continued their flight to safe investments that has played out across trading floors from Asia to the Americas this week as they fret about a possible global recession.

Hong Kong stocks slumped almost four percent to their lowest levels since June 2012.

On the first trading day of the Year of the Monkey, Hong Kong also slid on concerns about riots in the city this week that saw police battle street sellers, injuring several people. Analysts said the clashes could harm tourism.

– Dollar hits 15-month yen low –

Elsewhere, there were also sharp losses on most other Asian markets, with Seoul closing almost three percent down and Singapore off 0.8 percent, while Wellington also sank. However, Sydney rebounded on bargain-buying.

Tokyo, Shanghai and Taipei were all closed for public holidays.

The dollar sank heavily against the yen after Yellen’s testimony to Congress, and tumbled further on Thursday to strike 110.99 yen — the lowest level since late October 2014.

While she made no explicit comments on the Fed’s plans to lift rates — after December’s rise — her description of clouds looming over the US economy was taken as a hint there will be no increase in the immediate future.

Energy firms again felt the heat as oil prices continued to head south owing to the supply glut, overproduction and demand woes.

US benchmark West Texas Intermediate slid to $26.52 per barrel, which was very close to the 12-year low of $26.19 hit on January 20.

– Key figures around 1000 GMT –

London – FTSE 100: DOWN 2.7 percent at 5,521.2 points

Frankfurt – DAX 30: DOWN 3.1 percent at 8,734.6

Paris – CAC 40: DOWN 3.9 percent at 3,903.2

Milan – FTSE MIB: DOWN 5.1 percent at 15,862

EURO STOXX 50: DOWN 3.8 percent at 2,682.5

New York – Dow: DOWN 0.1 percent at 16,014.38 (close)

Hong Kong – Hang Seng: DOWN 3.9 percent at 18,545.80 (close)

Tokyo – Nikkei 225: Closed for a public holiday

Euro/dollar: UP at $1.1325 from $1.1286 on Wednesday

Dollar/yen: DOWN at 111.36 yen from 113.40 yen

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