On 20 January, 2016 – Several stock indices entered bear territory

Global stocks tumbled thanks to falling oil prices and worries about China’s growth. 
United States
Stocks had a wild day of trading as worries about economic growth and the continued slump in oil prices weighed on investors. Markets had been steadily falling all day Wednesday but staged a turnaround in the last hour of the trading day. At the close, the Dow Jones industrials were down 1.6 percent, the S&P retreated 1.2 percent and the Nasdaq edged down 0.1 percent. Earlier in the day, the Dow had been down more than 500 points, but narrowed the loss to 250 points.
Oil prices continued their months’ long selloff, with the price of a barrel of crude oil at the lowest level since May 2003. On Wednesday, Royal Dutch Shell warned that it expected its profit for the fourth quarter of 2015 to be about half of what it was in the comparable period a year earlier. In addition, traders see no signs of the oil glut easing now that Iran has permission to sell into the world markets. The International Energy Agency said Tuesday that oil prices would likely slide further this year as the market adjusts to the extra oil from producers such as Iran. In recent sessions, however, some investors have begun to worry about the demand for oil.
The worldwide drop in stocks signaled nervousness among global investors despite a sanguine reaction earlier in the week to data showing that China’s economic growth continued to slow. Concerns about China’s prospects as well as the drop in oil prices and signs of weakness elsewhere have affected global markets in recent months. While many investors still expect the US economy to expand this year, they are increasingly watching for signs that a slowdown abroad could hurt growth here.
The consumer price index slipped 0.1 percent in December. Excluding the volatile food and energy categories, prices rose 0.1 percent. On the year, the CPI was up 0.9 percent while core was 2.1 percent higher. December housing starts declined 2.5 percent on the month to an annualized rate of 1.149 million. Starts eased after large gains the month before.
These data reflect observations at 4:00 PM US ET. Gold at the afternoon London fixing was up US$15.50 to US$1,101.75. Copper futures were up 0.6 percent to US$1.99. WTI spot crude was down US$1.91 to US$26.55. Dated Brent spot crude was down 53 US cents to US$28.23. The US dollar was up against the euro, pound, Swiss franc and the Australian dollar. However, it declined against the yen and Canadian dollar. The Dollar Index was up 0.03 percent. The yields on US Treasury 30 year bond and 10 year note were down 6 basis points to 2.76 percent and 1.99 percent respectively.
Europe
European markets incurred sharp losses Wednesday thanks to the continued weakness in crude oil prices. The falling crude prices sparked a global selloff in stocks as the price dropped to its lowest level in nearly 13 years. The International Energy Agency (IEA) warned that the oil market could “drown in oversupply” until at least late 2016. The selloff in Europe was broad based. There were heavy losses among mining and energy stocks, but bank and automakers were also under pressure. Italian banks remained under pressure after the ECB requested more information on their bad loans yesterday. The FTSE dropped into bear territory after falling more than 20 percent from its record highs in April with a decline of 3.5 percent. The CAC dropped 3.4 percent, the DAX retreated 2.8 percent and the SMI lost 3.1 percent.
Banks including Deutsche Bank, Commerzbank, Société Générale, Crédit Agricole and BNP Paribas finished lower. RWE and peer E.ON retreated. Automakers Volkswagen, BMW, Daimler, Peugeot and Renault were down. In Paris, Technip and Total tumbled. In London, Royal Dutch Shell declined after its fourth quarter profit fell by as much as 50 percent from a year earlier. BG Group, BP and Tullow Oil declined. Anglo American was down. The mining firm has entered into a share sale agreement with Batchfire Resources to sell its 100 percent interest in the Callide thermal coal mine in Queensland, Australia. BHP Billiton, Glencore and Rio Tinto retreated. ASML Holding climbed after announcing a new share buyback program.
UK jobless rate fell to its lowest level since early 2006 while the employment rate hit a record high in the three months ended November. However, wage growth remained subdued suggesting more time for the Bank of England to decide on an interest rate increase. In the three months to November, the ILO unemployment rate was 5.1 percent.
Asia Pacific
Stocks here retreated after rallying Tuesday as oil prices slid through $28 a barrel and Chinese shares fell again on worries about liquidity in the market. The International Monetary Fund lowered its global growth projections for this year and the next, citing a sharp slowdown in China’s merchandise trade and weak commodity prices that are hammering emerging markets and developing economies.
The Shanghai Composite was down 1.0 percent despite the People’s Bank of China pledging to inject more than 600 billion yuan into the banking system to help ease a liquidity squeeze. Sentiment turned sour after the China Securities Regulatory Commission approved a new batch of initial public offerings under a new IPO registration system. The Hang Seng plummeted 3.8 percent to its lowest level in nearly four years.
The Nikkei plunged 3.7 percent to a fresh 14-1/2 month low, as the dollar’s rebound stalled and oil wallowed at its lowest since 2003 after IEA’s warning that oil supply glut may last through 2016. Energy linked stocks bore the brunt of the selling, with Inpex, Japan Petroleum and JX Holdings sinking. Exporters Sharp Corp, Toshiba and Sony dropped after the US dollar dropped to 117.26 yen from 117.59 yen in New York trading overnight. Fast Retailing and Softbank also tumbled. Nippon Express reversed early gains to end lower. The company generated ¥39 billion in operating profit for the April to December period, up 12 percent from a year earlier.
Australian shares reversed early gains to end deep in the red amid a continuing sell-off across commodities. The S&P/ASX was down 1.3 percent-while the All Ordinaries was 1.2 percent lower on the day. BHP Billiton tumbled after cutting its iron ore guidance for the 2016 financial year. Rival Rio Tinto and Fortescue Metals Group also slumped. The four big banks also retreated.
South Korean shares fell sharply, with declines seen across the board on lingering concerns about China’s economy and a fresh bout of volatility in oil prices. The Kospi fell as much as 3.2 percent in early trading before closing down 2.3 percent, its lowest level in nearly five months. The Sensex lost 1.7 percent to slip below the psychological 24,000 mark for the first time since May 16, 2014. It later recouped some of its losses to close above that mark.
Global Stock Markets

Please remember, the value of investments and the income from them can do down as well as up. Funds that invest in overseas markets may be subject to currency fluctuations. Investments in small and emerging markets can be more volatile than other overseas markets. Reference in this document to specific securities should not be construed as a recommendation to buy or sell these securities, but is included for the purposes of illustration only.
Looking forward*
The European Central Bank announces its monetary policy decision. January flash EC consumer confidence will be posted. In the US the January Philadelphia Fed business outlook survey and the weekly jobless claims, money supply and Fed balance sheet will be reported.
*Note — all releases are listed in local time.