Stocks fell around the world, with the Dow Jones Industrial Average dropping more than 150 points, while bonds gained with the dollar on haven demand as China’s unexpected weakening of its currency once again raised fresh concern about the strength of the global economy.
U.S. stocks headed for a three-month low and emerging-market equities fell to the cheapest since 2009. Developing-nation currencies sank to a record, with Korea’s won weakening after North Korea’s claim of a nuclear test added to geopolitical risks already heightened by Middle East tensions. Brent crude reached its lowest level since 2004. The yen strengthened and Treasuries rose for a fifth session.
“This is risk aversion right now,” Benjamin Dunn, president of Alpha Theory Advisors, which works with hedge funds overseeing about $6 billion.
“This is like a replay of the same things that moved the markets in August. We’re perhaps getting confirmation that China is as bad as people think. We’ve lost the tailwinds from the Fed and investor enthusiasm and this adds to the mosaic of fear that’s out there right now.”
China’s growing tolerance for a weaker yuan signaled the government is struggling in its efforts to shore up economic growth and rekindled concern seen in August, when a shock devaluation sent U.S. stocks to their first correction in four years amid worry China’s slowdown would hamper global growth. Disinflation in Europe and a renewed selloff in commodities may make it harder for central banks to meet their policy goals.
The MSCI All-Country World Index fell 0.9 percent at 11:25 a.m. in New York. The Standard & Poor’s 500 Index dropped 0.8 percent, headed for its lowest close since October. The Dow Jones Industrial Average fell 162 points.
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