LONDON – Stock markets around the world fell sharply again on Wednesday after concerns about economic recession and falling commodity prices were fueled by a fresh spate of gloomy corporate earnings.
Emerging markets were hardest hit by the global retreat and the fresh commodity pressure, with the U.S. dollar and government bonds the big gainers.
MSCI's main index of emerging equities fell some 4.5 percent to its lowest level since June 2005, sharply underperforming the 2.45 percent loss in MSCI's index of world stock markets.
Global miner BHP Billiton warned on Wednesday that Chinese demand was set to weaken, echoing concerns last week from rival and takeover target Rio Tinto.
China said on Monday its annual economic growth fell to 9 percent in the third quarter from 10.1 percent previously and that factory output in September was at a six-year low.
"There is an increase in risk aversion. The emerging market world appears to be starting to collapse; that means it'll be much more difficult for the global economy to recover," said Peter Mueller, rates strategist at Commerzbank in Frankfurt.
Commodity price losses mounted everywhere. U.S. crude oil futures fell under $70 per barrel and London copper futures were down almost 4 percent to their weakest since December 2005.
The commodity slide and emerging markets retreat all helped boost the U.S. dollar to two year highs, while gold prices fell to their lowest in over a month.
"The demand outlook is bleak and overall market performance is poor. The metals market is ground zero in terms of performance," said Lin Hui, analyst at Orient Futures Securities.
MAJOR MARKETS SUFFER TOO
European shares followed Asian and Wall St stocks lower in early trade on Wednesday.
At 4:07 a.m. EDT, the FTSEurofirst 300 index of top European shares was down 2.25 percent at 903.14 points, led by basic resources and energy stocks.
The FTSEurofirst 300 has lost nearly 40 percent so far this year, punctured by a credit crisis that has piled up the losses at banks and slowed the economy. Vedanta Resources dropped 8.8 percent, BHP Billiton fell 7 percent, and Rio Tinto was 3.5 percent lower.
Losses in Asian shares accelerated in late trading there, with Japan ending down 6.8 percent, and South Korea slumping 5.1 percent. Shanghai's main bourse was down 3.2 percent.
The MSCI index of Asia-Pacific stocks outside Japan declined 5.1 percent, at one point touching its lowest since December 2004.
Wall St stock futures were indicated down again on Wednesday after a flurry of disappointing earnings heightened worries about the deteriorating profit outlook.
Tech bellwether Texas Instruments Inc warned of slowing sales for its widely used analog chips, while chemical company DuPont Co cut its full-year forecast. Caterpillar Inc, a maker of excavators and bulldozers, also missed profit expectations, sending its stock down 5.1 percent.
The dollar's rally to two-year highs against a basket of major currencies was driven by a host of factors, including repatriation of capital from emerging markets, falling commodity prices, relentless banking stress and hopes for a U.S. government fiscal boost to its economy.
The pressure of a higher dollar was felt most in Europe against the British pound, which lost nearly three percent to a five-year low of $1.6203 in Asian trade after Bank of England chief Mervyn King warned the UK was entering recession.
Britain will be the first of the Group of Seven top economies to release third-quarter gross domestic product data and the figures on Friday are expected to show its economy contracted in that period.
The cost of protection against defaults in Asian and Europe debt spiked to records after Argentina on Tuesday said it would take over its $30 billion private pension system in order to guarantee payments to retirees.
By 4:50 a.m. EDT, the Markit iTraxx Crossover index, made up of 50 mostly "junk"-rated credits, was at 780 basis points, according to data from Markit, almost 10 basis points wider versus late on Tuesday.
The index had jumped to around 795 basis points earlier, setting fresh record wides.
Euro zone government bonds extended gains on Wednesday, pushing the 10-year yield to its lowest in 1-1/2 weeks
At 3:24 a.m. EDT, December Bund futures were 46 ticks higher at 115.70 versus Tuesday's settlement close, having earlier risen to 115.87 -- the highest since October 10.