While you were sleeping: UPDATED Wall Street rally runs out of steam

Equities on both sides of the Atlantic moved lower as investors returned to the safety of government bonds.

On Wall Street, the Dow Jones Industrial Average declined 116.28 points, or 0.7%, to 16,957.67. The S&P 500 fell 1.2% to 1978.31 and the Nasdaq Composite dropped 1.4% to 4644.42.

“The market has come a long way in a hurry,” John Brady, managing director at futures brokerage RJ O’Brien, told the Wall Street Journal.

Now, ahead of a slew of central bank meetings “where global central bank policy is set to further diverge,” investors are becoming more cautious, he added.

The European Central Bank is set to meet Thursday, while the Bank of Japan and Federal Reserve are both scheduled to meet next week.worse-than-expected trade data renewed concerns about China's economy.

Driving the action, US crude oil lost 3.7% to $US36.50 a barrel. Energy and materials stocks led the S&P 500 lower. 

Oil prices declined amid concern that an agreement about curtailing production by major producers might prove tough to negotiate. Kuwait said it would freeze output only if all major producers including Iran agreed to participate.

Goldman Sachs warned the recent rally was unsustainable.

Rising oil prices "simply are not sustainable in the current environment," Reuters reported, citing the Goldman Sachs report.

The energy market "needs lower prices" to keep US shale producers from ramping up output, Goldman said in the report, according to Reuters. Otherwise, "an oil price rally will prove self-defeating, as it did last spring."

Bond prices rise
US Treasury bond prices rose, pushing the 10-year yield down to 1.832% from 1.902% on Monday. It was the largest one-day yield decline in a month.

Earlier, China posted a 25.4% drop in exports in US dollar terms last month compared to the year-earlier month, the largest in six years.

This followed an 11.2% decline in January. Imports fell 13.8% in February, after an 18.8% slide in January.

The fresh worries about China's economic recovery also sent prices of base metals, including copper and zinc, lower.

Indeed, the International Monetary Fund warned that the risk of "economic derailment" had increased.

"Global economic recovery continues but we are clearly at a delicate juncture, where risk of economic derailment has grown," IMF first deputy managing director David Lipton told the National Association for Business Economics in Washington.

"Again, I think that at the recent G20 meetings in China there was broad recognition of these risks and priorities," Mr Lipton said. "Now is the time to decisively support economic activity and put the global economy on a sounder footing."

In Europe, the Stoxx 600 Index finished the session with a 1% decrease from the previous close, led by a drop in mining stocks.

The UK's FTSE 100 Index, France's CAC 40 Index, and Germany's DAX Index all ended the day with a slide of 0.9% from the previous close. 

(BusinessDesk)