US markets pared losses but still finished lower this evening, after a stormy start to the week for global markets sent investors fleeing for shelter in safe havens such as gold and government bonds.
The Nasdaq, which at one point dipped three per cent, settled 1.8 per cent lower. Meanwhile, the S&P 500 finished the day 1.4 per cent lower, while the Dow Jones fell 1.1 per cent.
In the US the sell-off whipped into a gale in the middle of the day, with the tech heavy Nasdaq weighed down by Facebook and Amazon which closed down 4.2 and 2.8 per cent respectively.
In the windy city of Chicago, the Vix index of volatility was up more than 17 per cent to above 27 points in mid-afternoon trading, although it later settled.
That came after London’s FTSE 100 index crashed 158 points to close in bear market territory at 5,689, while the FTSEurofirst 300 index plunged to a 16-month low.
“The windswept streets of the City blew away the bulls,” said IG analyst Chris Beauchamp.
Financial stocks were pummelled, with shares in German banking giant Deutsche Bank down 10 per cent in Frankfurt, having lost 46 per cent in the past three months.
Shares in emerging market-exposed HSBC dropped to their lowest levels since 2009, while Barclays shares had to be briefly suspended after diving eight per cent in intraday trading.
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“The banks look like someone trying to walk across London Bridge, struggling to stay on their feet,” said Michael Hewson of CMC Markets.
Analysts have blamed the banking sector sell off on increasingly dovish monetary policy putting pressure on margins, as well as general fears over debts related to a languishing oil price and struggling emerging markets. Worries over global growth and a slowdown in China continue to haunt equities.
Greece was the worst hit region, with financial stocks down over 20 per cent as Athens’ stock exchange touched lows not seen since 1991.
Greek bank stocks have fallen by 56 per cent so far this year.
The Stoxx Europe 600 Banks Index, a measure of Europe’s banking sector, finished the day down 5.5 per cent at 138 points. The index has now recorded six straight weeks of loses.
Global oil prices added to three day losses, with the US benchmark, West Texas Intermediate, dipping below $30 per barrel.
The storm in risky assets pushed investors towards gold, pushing the price above $1,200 an ounce,
coming off the back of the yellow metal’s best week in two years.
“A hurricane has blown investors on to the Yellow Brick Road,” said Russ Mould from AJ Bell.
Back in London, payments processor Worldpay tumbled 8.7 per cent while stockbroker Hargreaves Lansdown dived 7.6 per cent.
Tech stocks also suffered, with chip maker ARM and satellite giant Inmarsat both down around seven per cent.