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Equities around the world took a dive on Wednesday, with emerging market stocks set to confirm a bear market and the U.S. dollar hitting a 13-month high, while weakness in China’s yuan rattled investors’ nerves.

The stronger dollar also put commodities under pressure across the board, with copper hitting a 12-month low and gold at an 18-month low. Oil futures also lost ground.

While fears of a crisis in Turkey still loomed, China was in sharp focus as the yuan sagged nearly 0.8 per cent to 6.9467 per dollar, hitting its weakest level since January 2017 following disappointing economic data earlier this week.

The data stoked speculation whether the People’s Bank of China would intervene with more fiscal stimulus to stem its currency from breaking through the 7-yuan mark.

“Today investors are waking up to the idea that the situation in China may be pretty impactful as far as global markets go,” said Emily Roland, head of capital markets research at John Hancock Investments.

“With China being the engine of global economic growth, if you start to see their currency weaken significantly because of the slowdown we’re seeing there and you start to see the dollar meaningfully increase, there could become a point where there’s a liquidity issue globally,” Roland added.

Turkey’s lira eked out a second day of gains as authorities tightened the screws on foreign investors aiming to short the currency. But the country’s failure to tackle galloping inflation kept investors fearful that Turkey was headed for full-blown crisis and debt defaults.

Investors stepped up safe-haven holdings of the U.S. dollar due to worries about China and Europe’s exposure to Turkey, which pushed the euro to its weakest level in over a year.

The dollar index was flat, with the euro down 0.01 per cent to $1.1341.

The S&P 1500 Metals & Mining index was down 4.8 per cent for its biggest one-day drop since March, after hitting its lowest point since late November earlier in the day.

Spot gold dropped 1.3 per cent to $1,177.84 an ounce.

Industrial metal prices also tumbled, with benchmark copper hitting a 15-month low of $5,773 a ton on the London Metal Exchange and zinc touching $2,291, a level last seen in October 2016. Lead dropped as low as $1,919.50, its lowest since September 2016 and the metal’s biggest daily loss in nearly seven years.

MSCI’s emerging equities index was last down 1.9 per cent after having fallen more than 20 per cent from its January intraday high earlier in the day. Latin American currencies also slid.

In Toronto, the S&P/TSX composite index fell 182.17 points, or 1.12 per cent, to 16,148.50, posting its biggest daily percentage decline since June.

The energy sector dropped 3.7 per cent on a weakening global economic growth outlook and a report of rising U.S. crude inventories.

The financials sector slipped 0.3 per cent. The industrials sector fell 0.7 per cent.

The materials sector, which includes precious and base metals miners, lost 4.3 per cent as gold prices fell to a more than 18-month low and industrial metal prices tumbled.

The healthcare sector rose 12.2 per cent, boosted by shares of Canopy Growth Corp, which jumped 31.3 per cent after Corona beer maker Constellation Brands said it would invest a further $4-billion in the cannabis producer.

In New York, the Dow Jones Industrial Average fell 137.51 points, or 0.54 per cent, to 25,162.41, the S&P 500 lost 21.59 points, or 0.76 per cent, to 2,818.37 and the Nasdaq Composite dropped 96.78 points, or 1.23 per cent, to 7,774.12.

The pan-European FTSEurofirst 300 index lost 1.41 per cent and MSCI’s gauge of stocks across the globe shed 1.27 per cent.

The CBOE Volatility Index, Wall Street’s so-called “fear gauge,” jumped to a more than six-week high of 16.86, showing rising demand for protection against a near-term drop in U.S. stocks. The index was last up 2.97 points at 16.28.

Benchmark 10-year U.S. Treasury notes last rose 12/32 in price to yield 2.8533 per cent, from 2.895 per cent late on Tuesday.

The backdrop to all this is the escalation in global trade tensions, with Beijing lodging a complaint to the World Trade Organization to determine the legality of U.S. tariff and subsidy policies.

Turkey has also raised tariffs on some U.S. products “in response to the U.S. administration’s deliberate attacks on our economy”, Vice President Fuat Oktay wrote on Twitter.

Oil futures slid on Wednesday, with U.S. crude settling 3 per cent lower after government data showed a surprise weekly increase in domestic crude stockpiles, compounding worries about the global economic growth outlook.

U.S. crude futures settled at $65.01 a barrel, down $2.03, or 3 per cent. Brent crude futures were down $1.70, or 2.35 per cent, at $70.76 a barrel.

U.S. crude inventories last week rose 6.8 million barrels even though refinery crude runs hit a record high, Energy Information Administration data showed. Crude stocks at the Cushing, Okla., delivery hub for U.S. crude futures rose 1.6 million barrels.

Reuters

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Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 22/05/24 9:02pm EDT.

SymbolName% changeLast
WEED-T
Canopy Growth Corp
-6.66%12.89
STZ-N
Constellation Brands Inc
-0.81%248.94

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