LONDON: Stock markets extended a global sell-off Tuesday on rising prospects of Britain next week voting to leave the European Union.
Investors meanwhile started paying for the privilege of owning rock-solid German government bonds as fears of a possible Brexit and economic worries caused a rush to the safety of German debt.
Strong demand for German sovereign bonds, known as "Bunds", caused prices to peak, in turn pushing their yields into negative territory for the first time ever.
"The nervousness around the Brexit story increased the volatility in global bond markets," said Ipek Ozkardeskaya, market analyst at traders London Capital Group.
In a bid to seek safety, traders are piling also into the yen and gold, or alternative haven investments.
On Tuesday, the euro hit a 3.5-year low at 118.52 yen.
Caution across markets was reinforced also by policy meetings of the US, Japanese and British central banks taking place this week.
The Federal Reserve will conclude a two-day meeting Wednesday and while it is not expected to hike interest rates for several months, investors hope it will give some guidance on monetary policy.
Opinion is divided on whether the Bank of Japan will add to its stimulus when it finishes its own gathering Thursday, while the same day the Bank of England is widely expected to hold rates at 0.5 percent.
"Expectations of weak global growth and ever-enduring easy monetary policy, likely to be reinforced at central bank meetings this week, is seeing a mass exit from equities and feeding demand for bonds, sending yields to record lows," said Jasper Lawler, analyst at traders CMC Markets.
Around 1030 GMT in stock market trades, London's benchmark FTSE 100 index was down 1.3 percent compared with Monday's close.
In the eurozone, Frankfurt's DAX 30 lost 0.7 percent and the Paris CAC 40 slid 1.4 percent.
Elsewhere on currency markets, the British pound dropped against the dollar and was steady versus the euro after Britain's most-read newspaper The Sun urged readers to vote to leave the European Union in an editorial Tuesday.
On Monday, the pound had hit two-month lows against the dollar and European single currency.
With just over a week to go until Britain's referendum, a series of polls have put the pro-leave camp in front, raising the possibility that its four-decade ties to the bloc could be cut.
The prospect of one of the biggest economies in the EU breaking away has led to warnings of a new wave of world market turmoil as they struggle to recover from the panic that wiped trillions off valuations at the start of the year.
- Key figures at 1030 GMT -
===========================
London - FTSE 100: DOWN 1.3 percent at 5,966.88
Frankfurt - DAX 30: DOWN 0.7 percent at 9,590.23
Paris - CAC 40: DOWN 1.4 percent at 4,168.66
EURO STOXX 50: DOWN 1.0 percent at 2,824.42
Tokyo - Nikkei 225: DOWN 1.0 percent at 15,859.00 (close)
Hong Kong - Hang Seng: DOWN 0.6 percent at 20,387.53 (close)
Shanghai - Composite: UP 0.3 percent at 2,842.19 (close)
New York - DOW: DOWN 0.7 percent at 17,732.48 (close)
Euro/dollar: DOWN at $1.1220 from $1.1292 late Monday
Dollar/yen: DOWN at 105.70 yen from 106.19 yen
Pound/dollar: DOWN at $1.4142 from $1.4245
Comments
Comments are closed for this article.