New York, Oct 5: Major stock markets fell back on Thursday as a global selloff gained speed on mounting anxiety over rising US bond yields and the consequences for emerging economies, dealers said.
London and Paris stocks shed more than one percent in value while Frankfurt gave up less, but after spending most of the day in positive territory owing to a holiday on Wednesday.
US stocks also finished solidly lower, with the tech-rich Nasdaq slumping 1.8 percent and the Dow falling after hitting records the prior two days.
The declines came as the yield on the 10-year US Treasury bond rose to 3.20 percent after sharply increasing on Wednesday following a trove of positive US economic data.
A forecast-busting private jobs report, a surge by the services sector and optimism in the retail market were the latest evidence that the world's top economy is firing on all cylinders.
However, the news triggered a sell-off in Treasuries — a sign of confidence — sending the cost of borrowing to its highest level in seven years.
One fear is that higher rates will dissuade companies from taking loans and crimp economic growth.
“We've been in this loose money market for so long,” said JJ Kinahan, chief market strategist at TD Ameritrade.
– US bond yields spike –
“Peoples' fear is where is spending going to come from if people are less inclined to take loans. What's the new stimulus going to be?”
Some analysts also worry that a surge in interest rates in developed countries could also spur an exodus of funds from emerging markets.
“A broad based sell-off is sweeping across Europe as traders are worried about emerging market economies” that are increasingly important partners, noted David Madden, an analyst at CMC Markets in London
The prospect of higher yields, or interest rates, on US government bonds could mean that emerging market countries “will be hit by higher borrowing costs, and in turn it could damage their economies,” he said.
Oil prices pulled back from four-year highs the prior day, while the dollar also retreated after a push higher on Wednesday.
– Key figures around 2100 GMT –
New York – Dow Jones: DOWN 0.8 percent at 26,627.48 (close)
New York – S&P 500: DOWN 0.8 percent at 2,901.61 (close)
New York – Nasdaq: DOWN 1.8 percent at 7,879.51 (close)
London – FTSE 100: DOWN 1.2 percent at 7,418.34 (close)
Paris – CAC 40: DOWN 1.5 percent at 5,410.85 (close)
Frankfurt – DAX 30: DOWN 0.4 percent at 12,244.14 (close)
Milan – FTSE MIB – DOWN 0.6 percent at 20,612.93 (close)
EURO STOXX 50: DOWN 0.9 percent at 3,375.08 (close)
Tokyo – Nikkei 225: DOWN 0.6 percent at 23,975.62 (close)
Hong Kong – Hang Seng: DOWN 1.7 percent at 26,608.11 (close)
Shanghai – Composite: Closed for a public holiday
Euro/dollar: UP at $1.1515 from $1.1478 at 2100 GMT
Pound/dollar: UP at $1.3022 from $1.2940
Dollar/yen: DOWN at 113.92 from 114.53 yen
Oil – Brent Crude: DOWN $1.71 at $84.58 per barrel
Oil – West Texas Intermediate: DOWN $2.08 at $74.33 per barrel