Stocks slump and bonds rally as global fears mount

The Iseq index of Irish shares followed other markets down as shares suffered their biggest losses in years and the dollar slumped yesterday after the latest inflation data from the United States and China fanned worries about a global slowdown, driving investors into safe-haven government debt.

The S&P 500 fell nearly 3per cent, putting it on track for its worst day in nearly three years, while European equities finished 3.2 per cent lower and marked their biggest one-day slide in almost four years.

The sell-off wiped out all of the year’s gains in major US and European indexes, and a key gauge of Wall Street anxiety hit a three-year high as investors rushed to protect against further losses in markets.

Popular trades that have worked for most of the year, including heavy bets on the dollar, more gains in stocks, and on an eventual rise in yields, are unravelling.

"Right now, the risk play is off the table until stability re-enters, whether it's through better economic data, better grip and understanding of the Ebola concerns," said Andre Bakhos, managing director at Janlyn Capital LLC in Bernardsville, New Jersey.

“There wasn’t a single trigger,” he said. “We’ve been in a downtrend recently and it’s been a continuation of the recent trend change to the negative.”

Dublin

The Iseq was down 2.59 per cent, wiping some €4 billion off the value of quoted Irish companies.

Kerry Group was down almost 4 per cent at €49.84 and Paddy Power fell 2.37 per cent to €52.72.

Ryanair was down by something similar, closing at €6.768 a fall of 2.73 per cent on the day. CRH fell 3.25 per cent to €15.94.

Dalata was up 0.7 per cent on confirmation that it has acquired the Clayton Hotel and Whites of Wexford Hotel for €31.7 million in cash.

Fyffes fell 1.68 per cent to 99.3 cent after Brazil's Cutrale Group and Safra Group boosted their offer to buy Chiquita Brands International to about $658 million.

The Irish group responded in statement saying its rival bid was worth $15.46 – $20.01 per share and that a deal with Cutrale-Safra “undervalues the company’s potential and represents only a finite value, putting a hard cap to upside for Chiquita shareholders”.

US

A

fall in China’s inflation rate to a five-year low and a decline in US producer prices for the first time in over a year were worrisome signs to investors already skittish about the path of the global economy and caused them to reassess their views on when the US

Federal Reserve

might hike interest rates.

The latest news on the spread of Ebola added to a climate of fear, with another Texas healthcare worker testing positive for the deadly virus, Texas officials said yesterday.

Almost 4,500 people have died of the disease, mostly in West Africa.

An MSCI gauge of stocks in major markets was down 2.2 per cent, its largest daily decline since June 2013. The CBOE Volatility Index rose to 29.54, after earlier hitting 31.06, the highest level since May 2011.

Trading volume in the options market was projected to be its busiest on the year, according to Trade Alert data.

The Dow Jones industrial average fell 456.89 points, or 2.8 per cent, to 15,858.3, the S&P 500 lost 57.04 points, or 3.04 percent, to 1,820.66, and the Nasdaq Composite dropped 109.60 points, or 2.59 per cent, to 4,117.57.

UK

Britain’s top share index hit a 15-month low, with cyclical sectors such as commodities and banks falling on concerns about the global economy and drugmakers slipping on AbbVie’s decision to reconsider its takeover bid for Shire. The blue-chip

FTSE 100 ended 2.8 per cent lower at 6,211.64 points, the biggest one-day percentage decline in 16 months and the lowest level since the middle of 2013. "The stock market is in a fear mode at the moment on worries about global growth conditions and normalisation of US interest rates," said Henk Potts, director of global research at Barclays.

“But if the sell-off continues, it could prove to be a strong entry point into an asset class that we think will continue to outperform.”

Europe

A sell-off in European stocks accelerated, with a key index suffering its biggest one-day slide in nearly three years, as investors slashed exposure to risky assets such as equities on mounting worries about global growth.

Greek equities featured among the worst losers, as Athens’s benchmark ATG index succumbed to a second day of selling pressure and sank 6.3 per cent. Traders cited political uncertainty and a spike in Greek 10-year bond yields, which rose above 7.6 per cent.

"There's been a big acceleration of the sell-off in stocks, with a spike in risk aversion spreading across the board to bonds and the currency market, and even a return of stress around Greek assets," said Alexandre Baradez, chief market analyst at IG France.

The FTSEurofirst 300 index of top European shares provisionally closed 3.1 per cent lower at 1,252.83 points, a level not seen since December last year.