By TOMMY STUBBINGTON
Updated Sept. 22, 2015 9:18 a.m. ET
5 COMMENTS
Global stocks fell sharply on Tuesday as worries about the pace of global growth and uncertainty about the Federal Reserve’s plans to raise interest rates continued to fuel big swings in markets.
U.S. stock futures declined, while European shares steadily racked up heavy losses after opening little changed.
The Stoxx Europe 600 was 2.6% lower early afternoon, hit by losses in auto stocks amid concerns that the scandal over Volkswagen AG’s alleged manipulation of U.S. emissions tests could broaden to engulf the wider industry.
Futures indicated a 1.7% opening loss for the S&P 500. Changes in futures aren’t necessarily reflected in market moves after the opening.
Traders and investors said there was no obvious catalyst for the broad-based losses, which came as a rally on Monday petered out and extend a pattern of sharp gyrations since the Federal Reserve said on Thursday that it wasn’t raising interest rates this month. The Fed’s decision sparked renewed fears over sluggish global growth and has left investors second-guessing when the first rate move will come.
“It’s a very skittish market,” said Wouter Sturkenboom, senior investment strategist at Russell Investments, which has $266 billion under management.
“A few months ago, people saw down moves as an opportunity to start adding. Now, as soon as they see a down move they sell and sell hard,” he said, adding that Russell has reduced holdings of stocks in some of its multiasset funds in recent days.
Government bonds climbed as investors sought assets perceived to be safe. The 10-year U.S. Treasury yield fell 0.05 percentage point to 2.150%. Yields fall as prices rise.
Business sector data from China, Europe and the U.S. on Wednesday will be important in determining the market’s next move, according to Christian Stocker, an equity strategist at UniCredit.
“The reason for the uncertainty is the Fed. Now everyone is concerned about the state of the global economy,” he said.
Earlier, most Asian markets had gained, catching up with Monday’s rally in Europe and the U.S. China’s Shanghai Composite closed 0.9% higher ahead of President Xi Jinping’s first state visit to the U.S.
Hong Kong’s Hang Seng Index rose 0.2% and South Korea’s Kospi was up 0.9%.
In Europe, indexes were dragged down by heavy losses in mining stocks, with Glencore falling 14%. Analysts at Credit Suisse on Tuesday cut earnings’ estimates heavily across the sector, citing recent declines in commodity prices.
“Until China demand and emerging-market currencies find a floor, it will remain challenging to put an absolute floor on commodity prices,” Credit Suisse said in a note.
