The prospect of a downgrade in the UK government's credit rating and mixed signals on the state of the US economy sent stocks on Wall Street for a third day.
The Dow Jones Industrial Average declined 129.91 points, or 1.5%, to close at 8292.13, and the S&P 500-stock index slid 15.14, or 1.7%, to 888.33.
Both benchmarks were weighed down by losses in their most economically sensitive components. Alcoa, Schlumberger and Deere all slid at least 4.9% on concern a lingering recession will reduce demand for materials, energy and machinery.
Among blue chips, Caterpillar slumped 4.6%, and Home Depot nearly 4%. The energy sector was also hard-hit as crude oil gave up some of its recent advance.
Canadian stocks declined for the first time in three days, led by energy producers.
EnCana dropped 5.2% and Suncor Energy fell 3.6% as crude slipped from a sixth-month high. Potash Corporation of Saskatechewan, the world’s biggest producer of the fertiliser, fell 4.6%.
The S&P/TSX Composite Index is down 233.95 points, or 2.3%, to 9998.49.
European stocks dropped for the first time in six days. The Dow Jones Stoxx 600 Index slid 2% to 207.57.
National benchmark indexes retreated in all western European markets that were open. Stock exchanges in Scandinavia, Switzerland, Austria and Luxembourg were closed for a holiday.
The UK’s FTSE 100 Index plunged 2.8% after Standard & Poor’s threatened a drop in the AAA credit rating.
British Land declined 8.2% after the largest office developer in London reported a record annual loss. HSBC fell 3% and Vodafone, the world’s biggest mobile-phone company, dropped 4.3% as Nomura advised selling the shares.
France’s CAC 40 dropped 2.6% and Germany’s DAX lost 2.7% as ThyssenKrupp and Commerzbank declined.
Commodities: Oil down, gold up
Crude oil fell from a six-month high after the US Federal Reserve said that recovery may fail to take root in the US, the world’s largest energy consumer.
The minutes of the Federal Open Market Committee meeting on April 28 and 29 showed that policy-makers see “significant downside risks” in the economic outlook.
US daily fuel demand in the four weeks ended May 15 fell 7.6% from a year earlier.
Crude oil for July delivery dropped as much as $US1.53, or 2.5%, to $US60.51 a barrel in New York.
Gold rose to the highest price since March as a slump in global equity markets increased the appeal of precious metals as an alternative investment. Silver touched the highest since February.
Gold futures for June delivery gained $US14.10, or 1.5%, to $US951.50 an ounce in New York.
Currencies: Pound, dollar down
The pound dropped against every major currency after a credit rating drop was threatened for the first time as the government’s finances deteriorate amid the economic slump.
The UK currency had its biggest decline in a week versus the dollar and dropped the most in two weeks against the euro as the outlook for the AAA rating was switched to to “negative” from “stable.”
The dollar traded near an two-month low against the yen amid speculation the US Federal Reserve will print more cash to boost purchases of assets to counter the global slump.
The euro rose to a four-month high against the dollar after a European manufacturing and services survey beat economists’ forecasts.
The pound weakened to $US1.5646 and to 88.14p per euro. The dollar depreciated to ¥94.90 and to $¨ß1.3785 per euro.
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