Global stocks hit the rocks after Asian markets slump
A drop in bank shares kept European shares under pressure on Tuesday, after losses in Asian markets sent investors scurrying for safe havens.
Turmoil in Asia set the tone for the session, as yields on longer-term Japanese bonds fell below zero for the first time, the yen surged to a 15-month peak and gold reached its highest since June.
After a choppy morning, the pan-European FTSEurofirst 300 turned lower, dropping 1.8%. It touched its lowest levels since October 2014 as it fell for a seventh straight day.
The STOXX Europe 600 bank sub-index fell 3.4%, leaving it down around 9% so far this week. Shares in several Italian banks were suspended from trading after dropping sharply.
The euro zone bank index was down for its seventh straight week, set for its longest weekly losing streak since 1998.
Other growth-sensitive sectors, such as basic resources, also came under pressure, as copper fell 2%.
In all, world stocks fell 0.9%, and S&P 500 e-mini futures also were down 0.9%.
Many investors believed that signs of stress in the market for credit default swaps pointed to further declines ahead.
"There is a high probability of a further correction in equity prices, led by banking and energy stocks. There could be a wave of defaults in the energy sector and that will damage the balance sheet of the banking sector," said Lorne Baring, managing director of B Capital Wealth Management. Slowing global growth was clouding the outlook further, he added.
"We are advising our investors to drastically reduce risk and build protection."