October 10, 2014 / 12:38 AM / in 3 years

Growth worries slam stocks, oil, emerging markets

NEW YORK (Reuters) - Stocks on major markets fell on Friday, with an index of global equities hitting a seven-month low, and oil slumped to a four-year low as worries about weak worldwide economic growth continued to take a toll on investor confidence.

Traders work on the floor of the New York Stock Exchange (NYSE) February 10, 2014. REUTERS/Brendan McDermid

Most major markets declined about 1 percent on Friday, though the U.S. benchmark S&P 500 index fell just 0.2 percent, while the tech-heavy Nasdaq experienced the biggest losses on Wall Street.

Investors have scrambled to reduce big bets in stocks and other risky assets after reaping big gains from a rally in major world equity markets that has only seen brief interruptions in the past three years.

Assets tied to expectations for improved growth have been hit by a recent raft of weak indicators from Europe and China at a time when other big economies, including Japan and Brazil, face their own hardships and as the U.S. Federal Reserve is expected to reduce monetary accommodation in the coming months.

“In a vacuum of policy response, investors are selling first and asking questions later,” said Jim McDonald, chief investment strategist at Chicago-based Northern Trust Asset Management, which has about $924 billion in assets under management.

“It smells like there is a high degree of involvement from systematic traders, rather than fundamental traders. The magnitude of the move has been disproportionate to the change in the fundamentals,” he said.

The Dow Jones industrial average .DJI fell 9.7 points, or 0.06 percent, to 16,649.55, the S&P 500 .SPX lost 6.04 points, or 0.31 percent, to 1,922.17, and the Nasdaq Composite .IXIC dropped 57.72 points, or 1.32 percent, to 4,320.62.

In a sign of increased volatility, the CBOE Volatility Index .VIX, or VIX, the market’s favored gauge of Wall Street anxiety, touched a high of 22.06 on Friday, its highest intraday level since December 2012, as more investors paid up for protection against further declines. The VIX pared gains in the afternoon, trading at 19.74.

Concerns about global growth have hit oil prices hard, though they rose slightly in late afternoon trading. Brent crude oil LCOc1 was up at $90.17 a barrel, after touching its lowest level since December 2010 at $88.11. U.S. November crude CLc1 was flat at $85.80.

The risk aversion has boosted buying in safe-haven government debt. Lipper data shows U.S.-based taxable bond funds attracted $12.7 billion in inflows for the week ended Wednesday, a one-week record, while U.S. equity funds saw $6.7 billion in outflows, with most coming from exchange-traded funds.

The yield on the U.S. 10-year Treasury note US10YT=RR fell to 2.307 percent on Friday, the lowest level since June. The 30-year Treasury bond US30YT=RR was up 5/32 in price to yield 2.3088 percent, the lowest level since June 2013.

The MSCI all-country world index .MIWD00000PUS was down 0.9 percent after hitting its lowest level since March, while the pan-European FTSEurofirst 300 .FTEU3 index ended down more than 1 percent.

Later this month, the Federal Reserve is set to wind down the asset purchase program that has been credited with boosting markets over the past two years. Many observers doubt the recent stimulus measures unveiled by the European Central Bank will make up for the Fed program.

A string of dismal data from Germany and other large euro zone economies in recent weeks has fed anxiety over a possible recession in the region, and the jury is still out on the ECB’s proposed policy response.

Some investors have been speculating that the ECB will be forced to launch a sovereign bond-buying program, styled on the Fed’s quantitative easing.

China’s shares ended down on Friday as investors remained cautious ahead of September economic data due next week. Economists expect the Chinese economy to have grown at its weakest pace in more than five years, according to a Reuters poll.

The dollar index .DXY, which tracks the greenback against six major currencies, was up 0.42 percent at 85.878. Against the euro EUR=, the dollar was up 0.56 percent at $1.2619. The dollar traded flat against the yen at 107.83 yen JPY=.

Though it was still trading near four-year highs, the dollar index was on track to end a record-long rally with its first weekly fall in three months. [FRX/]

Euro zone bond yields bounced off record lows after top Federal Reserve officials hinted at an interest rate rise in the middle of next year, reversing some bets for a longer period of near-zero rates.

Editing by Meredith Mazzilli and Leslie Adler

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