Stocks dropped around the world, in New York the Dow sank 1.8 percent, as oil set the tone with crude stumbling back below $30 a barrel and renewing fears that global economic growth is tilting toward recession. The Bank of Japan's move to zero rates on Friday underlined its concern for the world's third largest economy and set the backdrop for today's flight from risk assets.
Treasuries and the Japanese Yen rose. The yield on the 10-year Treasury skidded 10 basis points to 1.8448 percent its lowest close in almost a year (2/5/15). The 2-year Treasury lost 8 points to 0.7183, its weakest final yield since last October.
Since the Federal Reserve hiked the Fed Funds rate 0.25 percent at the December 16th FOMC meeting the yield on the 10-year Treasury has lost 45 points and that of the 2-year 28 points to Tuesday's close.
West Texas Intermediate, the American standard for crude, fell 4.7 percent closing on the NYMEX at $29.57.
In three trading session crude has plummeted 14 percent after touching $34.82 on Thursday. This week has seen the biggest two day drop in almost seven years. U.S. stockpiles rose, highlighting the global oversupply.
Oil had risen from its 12 year low of $26.55 last week on speculation that Russia and OPEC would agree on production controls to try and put a floor under prices. Oil has lost about 20 percent this year as U.S shale drillers continue high rates of production and Iran is set to rejoin the market after the end of international sanctions.
Crude continued its losses after the New York close, touching $29.60 in the early Asian Market.
The Dow's 295.64 point loss to 16,153.54 was the lightest of the major U.S. averages. The S&P 500 shed 1.87 percent, 36.35 points ending at 1903.03 and the Nasdaq plunged 2.24 percent 103.42 points closing at 4516.95.
The yen climbed as high as 119.84 against the U.S. currency, closing at 119.97. The yen has regained almost half of its BOJ inspired losses on Friday. That day’s close at 121.14 had been the weakest since December 21st. The euro climbed marginally versus the dollar, finishing at 1.0916, about thirty points above the open.
Asian exchanges were, except for China, uniformly lower. The Nikkei lost 0.64 percent, the Hang Seng 0.76 percent. The Shanghai Composite gained 2.26 percent and the smaller Shenzhen Exchange rose 3.42 percent.
In Europe equites were red across the board. The FTSE in London lost 2.28 percent, the German Dax dropped 1.81 percent and the CAC 40in Paris, finished off 2.47 percent.
Friday’s spectacular 400 point rally in the Dow is already looking like a faded memory.
Chief Market Strategist
WorldWideMarkets Online Trading