Global stocks and the bonds of debt- laden nations tumbled after Europe’s debt crisis spurred a market rout yesterday that undermined confidence in financial trading mechanisms. Oil slid 2.4 per cent to lead commodities lower.
The Standard & Poor’s 500 Index fell as much as 3 per cent before paring losses to 1.3 per cent as of 11:39 a.m. in New York, leaving it little changed for the year. The MSCI World Index sank 2.2 per cent and the Stoxx Europe 600 Index plunged 3.9 per cent to the lowest since November. Greece led a drop in bonds of deficit-stricken European nations, with the 10-year yield premium demanded to own the securities instead of benchmark German bunds rising to a record of more than 9 percentage points.
Regulators are reviewing a plunge that briefly wiped out more than $1 trillion in market value yesterday as the Dow Jones Industrial Average slid almost 1,000 points before paring losses. Concern over the trading mechanisms that caused the volatility overshadowed the biggest growth in US jobs in four years. Equities today pared earlier losses amid speculation the European Central Bank will announce measures to stem the region’s debt crisis.
“The market is manic,” said Philip Orlando, the New York- based chief equity market strategist at Federated Investors, which manages about $400 billion. “The ECB needs to step in here and do something. If that really becomes true, we start to rally and focus on the terrific jobs report we had this morning. They could have solved this six months ago. There’s still a lot of concern about contagion. Investors are scared to death.”
Stocks have been pummeled the last two weeks amid concern European leaders won’t do enough to keep the most indebted nations from defaulting after a ¤110 billion($140 billion) rescue package for Greece failed to halt a rise in government borrowing costs.
