Currencies and stocks from Hong Kong to Johannesburg and London were already faltering. Then the U.S. joined in.
Stresses that have been building in global markets roared ashore in America on Thursday as the Standard & Poor’s 500 Index tumbled the most in 18 months and helped send the MSCI All-Country World Index to the lowest since January. Until now, the S&P 500 had been a source of stability amid China’s slowdown, Greece’s debt crisis and a plunge in emerging market currencies.
That status was shaken as the Chicago Board Options Exchange Volatility Index soared 49 percent this week. Global equities fell anew on Friday.
The S&P 500’s drop “is really showing that people are now questioning the rate of growth in the U.S. and mostly the impact of the developments in China and currencies on the American economy,” said Francois Savary, chief investment officer at Reyl & Cie. in Geneva. His firm oversees about $11 billion. “I don’t think there is evidence that the world economy is going to slow significantly but there is this uncertainty and people are reassessing, taking a step back.”
The MSCI Emerging Markets Index is heading for its biggest weekly loss since 2013, while the MSCI All-Country World Index has retreated 3.2 percent for the period, the most since December. The Stoxx Europe 600 Index slid 0.6 percent at 10:26 a.m. in London, heading for a correction.
Losses earlier in the week in American shares were limited as the rout in emerging-market assets deepened, with developing-nation equities sinking to the lowest level since 2009 and currencies from Malaysia to Kazakhstan tumbling. That changed Thursday as the S&P 500 closed below its average level of the past 200 days, wiping out gains for 2015 as investors sought the safety of gold and Treasuries.
“Unless you are the staunchest contrarian, then these are times to be very cautious,” Chris Weston, Melbourne-based chief market strategist at IG Ltd., wrote in a note to clients. “U.S. markets have held up well of late, being viewed as somewhat of a safe haven. This view seems to have deteriorated somewhat with the S&P 500 closing below its multi-month trading range.”
While declines of this magnitude are more common in Asian and European stock markets, the S&P 500 has gone more than three years without a drop of more than 10 percent, the longest stretch since 2004.
What’s important “is whether current weakness is just a correction or the start of a new bear market,” said Shane Oliver, the Sydney-based global strategist at AMP Capital Investors Ltd., which manages about $119 billion. “Periodic sharp falls in the range of 5 percent to even 20 percent are quite normal and healthy in that they help the market let off steam and the rising trend resume.”
The MSCI Asia-Pacific Index fell 2.3 percent on Friday, heading for its lowest close since February 2014. Japan’s Topix index sank 3.1 percent, posting its worst weekly loss since April 2014.
Hong Kong’s Hang Seng Index, the Jakarta Composite Index and Taiwan’s Taiex index closed Friday in a bear market. The Shanghai Composite Index slid 4.3 percent.
South Africa’s rand briefly weakened past 13 per dollar on Thursday for the first time in almost 14 years. The U.K.’s FTSE 100 Index of leading equities has declined 11 percent from its record high four months ago. The Euro Stoxx 50 Index is down 13 percent since April, when it reached its highest level since 2008.
“It’s not pretty,” said Mark Lister, head of private wealth research at Craigs Investment Partners Ltd. in Wellington, New Zealand. His firm manages about $7.2 billion. “The whole world’s looking a little bit sad at the moment. China still looks really worrying on a number of fronts.”