LONDON: European and US stock markets slumped on Monday (Feb 9) as investors cashed out of banking shares, with tech and oil stocks also taking a beating.
After a quiet session across Asia owing to the Chinese New Year, European markets plunged and were then followed by Wall Street. Markets across the continent ended the day down with losses of around three per cent or more.
Milan fell 4.7 per cent and Greek stocks dropped 7.9 per cent to a 25-year low. Meanwhile Frankfurt's DAX even went below 9,000 points for the first time since October 2014.
"I don't think there's any new information investors are digesting, it's still part of this negative momentum trade," said Jack Ablin, chief investment officer at BMO Private Bank.
Focus turned to the banking sector, but the rout deepened after oil prices also resumed their slide, while tech stocks got taken down on Wall Street.
"Banking shares across Europe buckled under the pressure of global growth concerns in concert with the ugly spectre of negative interest rates," said market analyst Jasper Lawler at CMC Markets UK.
Disappointing earnings by banks has turned investors cold, especially given the prospect of continued low or even negative interest rates in many countries. Banking shares were among the worst performers, with Bank of America, Morgan Stanley and Goldman Sachs losing more than five per cent.
In Europe, shares in Deutsche Bank plunged 13.7 per cent and Commerzbank slumped 6.6 per cent. Shares in BNP Paribas gave up 5.5 per cent and HSBC shed 4.2 per cent.
Meanwhile in Athens, the FTSEB index of financial stocks plunged by nearly 25 per cent as investors worried about another dispute between the Greek government and its EU-IMF creditors like one last year which wiped out the value of bank capital.
As oil prices fell again, energy stocks took another hit. Among petroleum-linked stocks, Anadarko Petroleum dropped 2.8 per cent and oil-services company Weatherford International fell 3.2 per cent. Shares in BP fell 1.9 per cent in London.
TECH STILL GENEROUSLY PRICED
Meanwhile, tech stocks took another thumping in the wake of shares in career-focused social network LinkedIn plunging more than 40 per cent on Friday after reporting a weak outlook. While LinkedIn shares were broadly stable, Amazon dropped 4.7 per cent and Facebook 5.0 per cent.
"Even after having fallen over 10 percent from record highs, top US tech stocks a still very generously priced, which doesn't allow for the kind of growth slowdown indicated in some earnings reports," said Lawler.
In foreign exchange meanwhile, the dollar gave capitalised on gains won thanks to an increased chance of another US rate rise this year.
Friday's latest monthly jobs report showed that US hiring eased in January but that the unemployment rate slipped to 4.9 per cent and wage growth increased modestly.
"The US dollar was mostly stronger on Monday, continuing the positive momentum from" last week's job report, said Lawler. "It's far from a foregone conclusion that the Fed will raise rates in March, even this year, but the faster wage growth means its back on the table and the dollar is reflecting that," he said.
Markets were said to be reacting also to weekend news that China's foreign exchange reserves had fallen to their lowest level in more than three years, as Beijing sells dollars to stop the yuan from depreciating further.
The world's largest currency hoard shrank by US$99.5 billion in January to some US$3.2 trillion, the People's Bank of China said on its website, the lowest since May 2012.
Worries about China's economy, the world's second biggest, have pushed the yuan to a five-year low. The country saw its first-ever annual decline in foreign exchange reserves last year as Beijing tried to prevent a more drastic devaluation.