Global marts crash after Yellen remark

Investors dumped stock across Asia, Europe, US

Global markets shuddered again Thursday with bank stocks in particular getting hammered, oil falling further and investors turning to perceived safe havens like gold.

Concerns are growing that the mounting market turmoil could put a brake on the global economy at a time it is already struggling with a litany of issues — from China’s slowdown, low inflation and plunging energy markets.

In Europe, France’s CAC 40 slid four per cent to 3,899.73, dragged down by a 13 per cent drop in the shares of bank Societe Generale, which warned about its profits. Germany’s DAX dropped 2.9 per cent to 8,752.79 and Britain’s FTSE 100 shed 2.5 per cent to 5,533.55.

Wall Street was off more than one per cent on Thursday, pushing the S&P 500 and the Dow Jones industrial average down 10 per cent for the year, as investors jettisoned stocks and scurried toward safer shores.

All 10 S&P major sectors were in the red, led by financials, especially banks. The financial sector, already the worst performing S&P sector this year, dropped 2.71 per cent.

Investors were not cheered by comments by US Federal Reserve Chair Janet Yellen, who on Wednesday cautioned that global weakness and falling financial markets could depress the US economy’s growth. That could, in turn, slow the pace of Fed interest rate hikes, she said, but investors appear more concerned about the outlook for growth.

“Weakness stems from Fed Chair Janet Yellen warning on current financial market turbulence and suggesting further rate hikes could be delayed, which added to already raised anxiety about the health of the global economy,” wrote analysts Mike van Dulken and Augustin Eden of Accendo Markets in a note to clients.

Market sentiment was hit earlier in the day, when some Asian indexes reopened after a holiday and caught up with days of market turmoil. Hong Kong’s Hang Seng dived 3.9 per cent to 18,545.80 after opening as much as 5 per cent lower. South Korea’s Kospi staged its biggest daily drop in nearly four years, down 2.9 per cent to finish at 1,861.54. Both markets opened for the first time this week after Lunar New Year holidays. China and Taiwan will reopen on Monday. Japan was closed Thursday for a separate public holiday.

Benchmark US crude was down 85 cents to $26.60 a barrel in electronic trading on the New York Mercantile Exchange, a 12-year low. The contract lost 49 cents on Wednesday. Brent crude, a benchmark for international oils, dropped 45 cents to $30.39 a barrel in London.

In currency markets, the dollar took a dive as investors adjusted their expectations for fewer interest rate increases in the United States — a currency tends to weaken with lower rates.