EG: Global Markets Tumble on China, Greece Worries
Financial markets tumbled Tuesday after China moved to rein in its credit markets and the specter of political instability reappeared in Greece, two developments that renewed concerns about global growth.
Dow Jones Industrial Average futures lost 136 points, or 0.8%, to 17713. S&P 500 futures declined 17 points, or 0.8%, to 2042, and Nasdaq-100 futures fell 39 points, or 0.9%, to 4241. Changes in stock futures don't always accurately predict moves in the stock market after the opening bell.
In China, the Shanghai Composite Index slumped 5.4%, the biggest daily percentage decline in more than five years. The tumble came after China's securities clearinghouse late Monday banned investors from using low-grade corporate bonds as collateral for short-term financing. The move is part of Beijing's structural reforms aimed at sustaining long-term economic growth.
European stocks also declined, with the Stoxx Europe 600 down 1.6%. Losses in the Greek stock market were especially steep. The tumble came after the government decided to bring forward a parliamentary vote for president. The vote will now take place Dec. 17, two months ahead of schedule.
U.S. stocks have pushed to fresh records in recent weeks, remaining resilient amid evidence that growth in Europe and Asia is slowing down. Developments on Tuesday sparked concerns that slowing growth could be persistent.
Rising levels of debt in China have helped fuel high growth levels in recent years. The new rule also applies to bonds issued by local governments, part of an effort to keep local government debt levels in check.
The election news in Greece came shortly after a decision by eurozone finance ministers to extend the country's deadlocked bailout talks into next year. Greece's debt crisis threatened the integrity of the eurozone in 2012, and worries about a potential collapse of the currency union sent global financial markets into a tailspin at the time.
"China seems to be tightening the funding screws in the name of financial transparency," said John Brady, managing director at futures brokerage R.J. O'Brien & Associates.
There were "tectonic shifts in the overnight" session, said Mr. Brady, referring to developments in China and Greece. It's "all weighing on U.S. futures," he added.
Assets seen as havens, such as gold and Treasury bonds, gained Tuesday. Gold futures rose 1.7% to $1215.50 an ounce. The yield on the 10-year Treasury note fell to 2.233%. Yields fall as prices rise.
The U.S. dollar fell sharply against other currencies, especially the Japanese yen. The dollar tumbled 1.1% to Yen119.56.
U.S. stocks fell Monday, with the Dow posting its biggest one-day loss in six weeks. The Dow fell 0.6% to 17852.48 and the S&P 500 declined or 0.7% to 2060.31.
This week's pullback comes after seven straight weeks of gains for the Dow and S&P. Many investors say the backdrop for stocks remains positive. The U.S. economy and corporate profits continue to improve. At the same time, stimulus measures from other central banks will continue to keep a lid on global interest rates, adding to the appeal of stocks.
On Tuesday, crude-oil futures rebounded, rising 0.9% to $63.66 a barrel.
Shares of Dow component Verizon Communications Inc. fell 1.8% in premarket trading. The wireless carrier said late Monday the discounts implemented to attract customers are pressuring profits.
Shen Hong contributed to this article.
Write to Saumya Vaishampayan at saumya.vaishampayan@wsj.com
