NEW YORK (Reuters) - Global equity markets fell sharply on Friday as slumping oil prices raised concerns about slower growth, while the dollar slipped against the yen on views the Bank of Japan may not ease policy as much as expected.
Trading in crude oil and the bond market was volatile, while stock investors were skittish in the wake of the euphoria that followed the U.S. Federal Reserve's first interest rate hike in almost a decade on Wednesday.
Wall Street accelerated its slide into the close, with the Dow closing more than 2 percent lower and the broad market S&P 500 down almost as much. All S&P sectors declined, led by a 2.51 percent fall in financial stocks .SPSY, and the S&P 500 notched its biggest two-day percentage loss since Sept. 1.
The sell-off appeared tied to lower oil prices and the Fed's move, and not options expiration, said Randy Frederick, managing director of trading and derivatives for Charles Schwab in Austin, Texas.
"The market is more sensitive to oil than anything else," he said.
MSCI's all-country world stock index .MIWD00000PUS fell 1.28 percent, while the FTSEurofirst 300 index .FTEU3 of leading European shares closed down 1.05 percent at 1,419.35.
The Dow Jones industrial average .DJI lost 367.39 points, or 2.1 percent, to 17,128.45. The S&P 500 .SPX fell 36.37 points, or 1.78 percent, to 2,005.52 and the Nasdaq Composite .IXIC shed 79.47 points, or 1.59 percent, to 4,923.08.
The yen gained after the BoJ merely tweaked its monthly asset-purchase program. The move halted the dollar's ascent, fueled in recent months by views that the Fed's likely decision to raise rates and the BoJ's path of more potential stimulus would drive investment into higher-yielding U.S. assets.
"The BoJ's move shows a weak hand," said Jens Nordvig, global head of FX strategy at Nomura in New York. "It suggests the BoJ is out of ammunition, and will not be able to deliver anything meaningful going forward," he said.
The dollar, which had hit a more than two-week high of 123.590 yen, fell 1.05 percent to 121.26 JPY=.
The euro rose 0.36 percent against the dollar at $1.0864 EUR=. The dollar index .DXY, which measures the greenback against a basket of six other major currencies, fell 0.57 percent to 98.704.
Equities suffered from fatigue after markets rose in anticipation of the Fed move, while the slumping price of oil drove investor sentiment on concerns over global growth and a growing supply surplus.
"We had a couple of strong days as a result of the Fed," said Andrew Wilkinson, chief market strategist at Interactive Brokers LLC in Greenwich, Connecticut.
"The market is getting sucked into a fear trade," he said. "It's really oil - is it a glut or a global slowdown? But I don't think it's symbolizing a slowdown in the global economy."
Crude oil resumed its retreat following a rebound of almost 1 percent after the U.S. benchmark traded well below $35 a barrel.
The reverse in prices came on news the U.S. oil rig count rose for the first time in five weeks. Seventeen rigs were added in the week ended Friday despite continued weak crude prices, which suggests no end in sight to the supply glut.
Global benchmark Brent crude LCOc1 fell 18 cents to settle at $36.88 a barrel, while U.S. crude futures CLc1 settled down 22 cents at $34.73 a barrel, the second straight day in almost seven years it closed below $35.
Prices on U.S. Treasuries rose in choppy trading on rising investor skepticism over the Fed's ability to raise interest rates as much as it would like next year.
The decline in crude and tumbling stock markets encouraged investors to seek the relative safety of U.S. government debt. The slide in oil prices suggests inflation will remain benign.
The benchmark 10-year U.S. Treasury note US10YT=RR rose 10/32 in price to yield 2.2005 percent.
Reporting by Herbert Lash; Editing by Dan Grebler and Chizu Nomiyama