Shares on major exchanges fell for a sixth consecutive day on Thursday while oil prices fell for a fourth day on Thursday, lurching again to 12-year lows as new financial market tumult in China brought a $30 per barrel handle within view. Oil has fallen every day this year, losing nearly 10 percent in a sudden dive that makes last year's Goldman Sachs warning of sub-$30 crude seem not so outlandish after all.
Brent settled down 48 cents at $33.75, after sliding to a low of $32.16, a level last seen in April 2004. US crude West Texas Intermediate (WTI) finished down 70 cents at $33.27, after hitting a low of $32.10, the lowest since late 2003. Stocks on Wall Street pared losses after China suspended the circuit breaker that stops trading for the day when stocks fall 7 percent, a halt that occurred twice this week. Analysts and investors said the mechanism, put in place to avoid market volatility, may have backfired.
The 7-percent drop in Chinese markets overnight had triggered a flight to safety, but the circuit breaker reversal helped cut losses in other risk assets, including the US dollar. Investors, however, remain concerned that China is struggling to keep control of the yuan. The People's Bank of China (PBOC) set the yuan midpoint rate at 6.5646 per dollar, a 0.5 percent decline that was the biggest between daily fixings since August. It was the eighth consecutive day the PBOC had set a lower guidance rate.
On Wall Street, energy stocks pared a 2-percent loss and major indexes were down about 1 percent, about half as much as at their session lows. Still, the S&P 500 was down almost 4 percent so far this week. "There is a wall of worry under full construction, brought on by China, fall in oil prices and uncertainty regarding quarterly earnings," said Terry Sandven, chief equity strategist at US Bank Wealth Management in Minneapolis.
At 2:49 pm, the Dow Jones industrial average was down 323.65 points, or 1.91 percent, to 16,582.86, the S&P 500 lost 38.28 points, or 1.92 percent, to 1,951.98 and the Nasdaq Composite dropped 117.56 points, or 2.43 percent, to 4,718.21. The S&P 500 was on track for its worst start to a year since 1928. The CBOE Volatility Index, the market's favoured gauge of Wall Street anxiety, was up 22.3 percent at 25.19, its highest level in about three weeks.
Billionaire investor George Soros, speaking at an economic forum in Sri Lanka, drew similarities between the present environment and the financial crash of 2008. He said global markets were facing a crisis and investors needed to be very cautious, Bloomberg reported. Yahoo fell 6.1 percent to $30.20 after Business Insider reported the company was working on a plan to cut its workforce by at least 10 percent. Alibaba, in which Yahoo has a stake, was down 6.6 percent at $72.25.
The pan-European FTSEurofirst 300 index and the euro zone's bluechip Euro STOXX 50 index were down 2.4 percent and 1.8 percent respectively, having fallen more than 3 percent earlier in the session. A gauge of major stock markets globally fell 1.4 percent.
STRONG EURO Investors fear China's economy is even weaker than had been imagined, with Beijing, in a bid to help exporters, allowing the yuan's depreciation to accelerate. The US dollar trimmed losses against a basket of currencies after the Chinese stock exchanges announced the removal of the circuit breaker. The dollar index was however down 0.4 percent on the day.
The euro gained 0.7 percent to $1.0849. The yen rose 0.4 percent to 118 per dollar after hitting 117.30, its strongest since late August. The benchmark US Treasury yield edged up after touching its lowest since late October. US 10-year Treasury notes were last down 4/32 in price to yield 2.1914 percent from 2.177 percent late Wednesday. Global oil benchmark Brent gained 0.5 percent at $34.40 a barrel and WTI gained less than 0.1 percent to $33.99 a barrel.