World stock markets slid Monday, with Asia taking the heaviest hit, as investors worried about signs of a sharp global economic slowdown.
Traders shrugged off news that an investigation found no evidence of collusion between US President Donald Trump’s election campaign and Russia.
The pound gave up earlier gains to trade lower against both the euro and the dollar after Prime Minister Theresa May admitted Monday she had still not secured the votes needed to get her Brexit deal through parliament, raising again the prospect that Britain could crash out of the European Union in two weeks’ time.
Dealers have been spooked by growing evidence of a slowdown, after a broad-based rally since the start of the year that was built on hopes for China-US trade talks and a more dovish Federal Reserve.
“Concerns over the health of the global economy heat up at a rapid pace,” said analyst Jameel Ahmad at traders FXTM.
In Europe key stock markets were lower at the close, with London the weakest performer.
Wall Street also got off to a softer start, but then edged into slightly positive territory, helping Europe off its worst levels in time for the closing bell. Minutes later, however, the Dow Jones index was back in the red.
Eurozone losses were also capped by the closely-watched Ifo index that showed recovering confidence among Germany’s business leaders in March after six months of decline.
– ‘Miserable session’ –
But earlier, Tokyo’s main stocks index was hammered 3.0 percent, while Hong Kong and Shanghai both dived two percent, as concerns festered also over a possible recession in the United States, dealers said.
“Despite a miserable session for Asia, European markets are managing to avoid heavy losses,” noted IG analyst Chris Beauchamp.
“The risk-off mood at the end of last week seemed dramatic, and was perhaps justified given the sudden shift in the economic outlook, but a better reading from the German Ifo index has provided some reason for optimism,” he added.
US and European equities had tumbled Friday as the yield on 10-year Treasury bonds fell below those for three-month notes — the first time this had happened since before the global financial crisis.
This so-called inverted yield curve shows investors are more willing to buy long-term debt — usually considered higher risk — as they consider the short-term outlook more risky.
“This development will psychologically encourage further anxiety and rocket fears that the global economy is heading for another downturn, if recent economic releases across the globe have not already provided indications that the downturn has arrived,” added analyst Ahmad.
The yield curve is closely watched since it has inverted prior to recessions in recent decades.
The rush to the 10-year US bond market followed weak manufacturing data out of the US, eurozone giant Germany and France on Friday.
That came days after the Fed’s announcement that it was unlikely to lift interest rates this year owing to unease about the US and global economy.
– Key figures around 1640 GMT –
London – FTSE 100: DOWN 0.4 percent at 7,177.58 points (close)
Frankfurt – DAX 30: DOWN 0.2 percent at 11,346.65 (close)
Paris – CAC 40: DOWN 0.2 percent at 5,260.64 (close)
EURO STOXX 50: DOWN 0.2 percent at 3,300.48
New York – DOW: DOWN 0.2 percent at 25,451.74
Tokyo – Nikkei 225: DOWN 3.0 percent at 20,977.11 (close)
Hong Kong – Hang Seng: DOWN 2.0 percent at 28,523.35 (close)
Shanghai – Composite: DOWN 2.0 percent at 3,043.03 (close)
Pound/dollar: DOWN at $1.3178 from $1.3209 at 2100 GMT on Friday
Euro/pound: UP at 85.87 pence from 85.59 pence
Euro/dollar: UP at $1.1317 at $1.1302
Dollar/yen: UP at 110.06 yen from 109.92 yen
Oil – Brent Crude: UP 13 cents at $67.16 per barrel
Oil – West Texas Intermediate: DOWN 4 cents at $59.00