Global stock markets remained under pressure Thursday following
the previous day's sharp selloff, with European indexes quickly
surrendering early gains.
The Stoxx Europe 600 was flat early in the session. The index
had plummeted 3.2% on Wednesday, as mounting worries about poor
global growth were compounded by some poor U.S. economic data.
Investors rushed to safe-retreat German government bonds,
pulling yields to an all-time low. Moves were amplified as money
managers were forced to exit money-losing trades as markets moved
against them, analysts said.
After a brief stabilization early Thursday, stocks extended
their fall.
"Markets are likely to be picking up the pieces today and trying
to work out where we go from here," said analysts at Rabobank.
Investors were awaiting consumer price inflation data for the
eurozone, expected to slow to an annual rate of 0.3%, a long way
below the European Central Bank's target.
"To say that the market's patience for weaker-than-expected
reports will be limited is an understatement," said Rabobank.
Germany's DAX and the U.K.'s FTSE 100 were both up 0.3% but
France's CAC 40 was 0.1% lower.
Italian and Spanish markets--which were hit particularly hard in
the selloff--registered further sharp falls, declined 0.5% and 1.1%
respectively.
European benchmarks were initially helped by a late rebound on
Wall Street, where U.S. stocks closed well above their mid-session
lows.
Some long-term investors said they were sticking with their bets
on stocks despite the bumpy ride endured by markets.
"While geopolitical risks, and the threat of the Ebola virus,
remain in the background, we believe the selloff is primarily
attributable to a sharp downward adjustment in market expectations
of global growth," said UBS Wealth Management's chief investment
office in a note to clients.
UBS Wealth, which oversees around $2 trillion of assets advised
clients to stick with equities given that U.S. economic growth
should continue, boosting earnings.
"[The] longer term investment case for equities remains intact,"
UBS Wealth said.
Bond markets saw a partial reversal of some of Wednesday's
moves. German 10-year yields climbed slightly to 0.76%, having
plummeted to an all-time low of 0.72% in the previous session. That
echoed a wild ride in the U.S. Treasury market, where yields sank
sharply after the weak data prompted investors to reassess the view
that the Federal Reserve will hike interest rates next year, before
picking up again.
"Yesterday's market moves took place on the back of huge trading
volumes, and certainly illustrate that volatility had not been
slaughtered for good. The size of the moves also brings back
memories of the depths of the financial crisis," said Jan von
Gerich, chief strategist at Nordea.
But bond yields in the eurozone's former crisis spots, including
Italy, Spain and Portugal, continued to climb Thursday.
Greek bonds also continued to weaken, with 10-year yields above
7.8%, having spiked on Wednesday as the country's plan to make an
early exit from its bailout program unnerved investors.
"The recent market action clearly implies Greece doesn't have
the credibility or the capability to make it on its own at this
point," Mr. Von Gerich said.
In currency markets, the dollar pared Wednesday's losses. The
euro was down 0.3% against the buck at $1.2776.
In commodities, Brent crude was 0.8% lower at $83.44 a
barrel.
Write to Tommy Stubbington at tommy.stubbington@wsj.com
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