Investors went for the red button very fast and hard on Monday morning in a frenzy of panic that swept through stock markets around the world.
World stock markets plunged as a near nine-per cent dive in China shares and a sharp drop in the dollar and major commodities sent investors rushing for the exit.
“Things are starting look like the Asian financial crisis in the late 1990s. Speculators are selling assets that seem the most vulnerable,” said Takako Masai, head of research at Shinsei Bank in Tokyo.
“China could be forced to devalue the yuan even more, should its economy falter, and the equity markets are dealing with the prospect of a weaker yuan amplifying the negative impact from a sluggish Chinese economy,” said Eiji Kinouchi, chief technical analyst at Daiwa Securities in Tokyo.
Equities transactions at the Nigerian Stock Exchange (NSE) reopened for the week on a downward trend as the market indicators decreased by 2.22 per cent.
The depreciation was due to price losses made by some capitalised companies.
As a result of the bearish trading, the market capitalisation closed lower at N10.013 trillion when compared with N10.240 trillion posted on Friday.
Equally, the All-Share Index decreased by 664.2 points or 2.22 per cent to close at 29,214.13 against the 29,878.33 achieved on Friday.
Analysis of the price movement chart showed that Seplat topped the losers’ table by N12.26 to close at N233.04 per share.
Dangote Cement came second with N7 to close at N170, while Guinness and Total Oil depreciated by N3 each to close at N116 and N152 per share respectively.
PZ Cussons declined by N2.90 to close at N26.93 per share.
On the other hand, Forte oil led the gainers’ chart by N10.90 to close at N239.10 per share.
Just as worrying was evidence that developed markets were becoming synchronised with the troubles. London’s FTSE with its large number of global miners and oil firms, was down for its 10th straight day, its worst run since 2003.
The pan-European FTSEurofirst 300 was last down 5 percent at 1,355 points, wiping around 400 billion euros ($460.16 billion) off the index and taking its losses for the month to more than 1 trillion euros.
“We are in the midst of a full-blown growth scare,” strategists at JP Morgan Cazenove said in a note.
A key measure of U.S. equity volatility, the CBOE Volatility Index, or VIX, shot above the 50 mark for the first time since 2009, and the New York Stock Exchange was forced to implement special price-indication measures to allow for a more fluid start to trading.
Wall Street
Wall Street caved in early with the Dow falling more than 1000 points — as traders aggressively sold stocks and bid-up only the safest asset classes. Treasury yields plummeted overnight and in early New York trading as a global stock selloff fuelled demand for safe-haven assets like Treasury bonds. Bond yields fall when prices rises and vice versa.
The Dow Jones Industrial Average tumbled 1065.4 points, or 6.5 per cent, to 15419, the S&P 500 plunged 97.6 points, or 4.9 per cent, to 1874, and the Nasdaq Composite dived 328 points, or 7 per cent, to 4385.
In a sign of the intensity of the selling, trade in S&P 500 and Nasdaq 100 futures was repeatedly halted early Monday after the contract hit the 5 per cent overnight limit. NYSE also invoked so-called “Rule 48,” which is used in times of high volatility to smooth the open of trade.
Meanwhile, traders took cover in a variety of safe-haven assets. The yield on the benchmark U.S. 10-year Treasury bond fell 0.06 percentage point to 1.988 per cent — falling under the 2 per cent mark for the first time since April. Bond yields move in the opposite direction of prices, so as traders bid-up the asset, yields fall. The Japanese yen, another global defensive play, advanced against the U.S. dollar and the euro.
With serious doubts also now emerging about the likelihood of a U.S. interest rate rise this year, the dollar slid against other major currencies.
Oil, others tumble
Commodities were under heavy pressure across the board, with the Bloomberg Commodity Index slumping to its lowest level since 1999. U.S. crude oil prices plummeted 3.5 per cent to $39.02 a barrel, striking a fresh 2009 low. Brent crude, the global benchmark, fell below the $45-a-barrel mark for the first time since 2009. Copper, seen as a bellwether for global economic conditions, skidded 2.8 per cent to $2.24 a pound. Gold prices were little changed at $1,157.00 a troy ounce.
As commodity markets took a fresh battering, Brent and U.S. crude oil futures hit 6-1/2-year lows as concerns about a global supply glut added to worries over potentially weaker demand from the normally resource-hungry China.
U.S. crude was last down 3.3 percent at about $39 a barrel while Brent dropped to $43.60 barrel to take it under January’s lows for the first time.
Copper, seen as a barometer of global industrial demand, tumbled 2.5 percent, with three-month copper on the London Metal Exchange also hitting a six-year low of $4,920 a tonne. Nickel slid 6 percent to its lowest since 2009 too at $9,570 a tonne.
Traders cited concerns over deteriorating economic and financial conditions in China, worries the Federal Reserve could fumble its first rate hike since 2006, and mounting instability in emerging markets as factors that contributed to the steep retreat.
Rush to buy Yen
Generally regarded as a safe haven asset that retains its value during periods of geopolitical or financial instability, investors rushed to buy more Japanese Yen, as China’s stock selloff extended into Monday.
The dollar dropped against the euro and the Japanese yen on Monday as investors worried that signs of slowing growth in China will prevent the Federal Reserve from raising interest rates at its next meeting.
The euro bought $1.1492, but briefly rose above $1.15, marking the first time it’s been at that level since February, FactSet data showed. The shared currency late Friday in New York traded at $1.1360.
The dollar briefly dipped below ¥120 before returning to ¥120.15. Late Friday, it bought ¥121.96. The yen was up against its major rivals as a selloff in Asian markets prompted investors to seek the perceived safety of the Japanese currency. The euro was buying ¥137.93, down from ¥139.00 Friday.
Investors sell-off stocks as economic meltdown fear grows
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