Global market panic fades as Wall Street stems bleeding

John Biers, Agence France-Presse

Posted at Feb 07 2018 08:19 AM

People walk on Wall Street in front of the New York Stock Exchange (NYSE) in New York, US Tuesday. Brendan McDermid, Reuters

NEW YORK - A collective sigh of relief swept across global trading floors on Tuesday as bargain hunters swooped in to buy Wall Street stocks, stemming a hemorrhage that had been spreading panic among investors. 

With Asian and European equity markets plunging, New York stocks started their trading day with another jaw-dropping fall as the Dow index dived nearly 3 percent, adding to the previous day's record loss.

But within minutes a fierce battle appeared to be playing out between those betting on further declines, and those who thought that the market correction had gone too far, leading to some wild price gyrations.

After a swing of nearly 1,200 points during the session, the Dow finished solidly higher, tacking on more than 500 points, or 2.3 percent from Monday's close, to 24,912.77.

"The mood on the floor is relief," said FTN Financial chief economist Chris Low, adding that the Dow's "violent" descent on Monday -- at one point losing 700 points in a few minutes -- would not soon be forgotten. 

"It reminds me of the deep ocean sailors I know," Low said. "They love it, but they're also respectful and terrified."

The steep losses in recent days, as well as the report early Tuesday that the US trade deficit surged 12 percent in 2017, undercut President Donald Trump's relentless economic cheerleading, as he has been quick to take credit for every new Wall Street record or data point. 

EUROPEAN, ASIAN BOURSES TUMBLE 

Even before an impressive late-session surge, Wall Street's stronger performance helped the main European stock markets off their worst levels. Still, leading bourses in remained deep in the red at the close, with Paris, Frankfurt and London all down more than two percent. 

Earlier, the Nikkei in Japan slumped almost five percent. Hong Kong lost more than five percent in its worst day since summer 2015, while Sydney and Singapore each sank three percent. 

"Markets usually grind to the upside, but fall like a rock," said analyst Naeem Aslam at trading firm ThinkMarkets.

"Traders have been looking at the market for the past year moving in one direction which was skewed to the upside. Now, it's time for the bears to take their revenge."

MORE VOLATILITY AHEAD? 

The sell-off striking fear in investors' hearts began last Friday when bright US non-farm payrolls data sparked concern that inflation will reappear this year -- and that the Federal Reserve will in response raise borrowing costs more quickly than anticipated.

The pullback has ended an unusually placid period for markets that saw US indices surge to record after record on improving economic data and expectations that US tax cuts enacted by President Donald Trump would lift earnings and pave the way for still-higher gains.

Many on Wall Street remain optimistic about the markets. Goldman Sachs on Tuesday reaffirmed its year-end target of 2,850 points for the S&P 500, concluding that "the fundamental drivers of the equity market remain intact."

Low agreed that the overall economic outlook remained upbeat, but said investors may see more volatility ahead. 

And that US fiscal stimulus in an economy at full employment also is fueling concerns that interest rates will start to rise to stem inflationary pressures.

A key question is how new Federal Reserve Chair Jerome Powell and new voting members of the policy-setting Federal Open Markets Committee will respond if inflation rises significantly.

"There are still a lot of unanswered questions," Low said. "There's no question the economy is just roaring. The big question is what if we overheat? Can this new Fed handle it?"

KEY FIGURES AROUND 2200 GMT (6 a.m. Wednesday in Manila)

New York - DOW: UP 2.3 percent at 24,912.77 (close)

New York - S&P 500: UP 1.7 percent at 2,695.14 (close)

New York - Nasdaq: UP 2.1 percent at 7,115.88 (close)

London - FTSE 100: DOWN 2.6 percent at 7,141.40 points (close)

Frankfurt - DAX 30: DOWN 2.3 percent at 12,392.66 (close)

Paris - CAC 40: DOWN 2.4 percent at 5,161.81 (close)

EURO STOXX 50: DOWN 2.5 percent at 3,392.53

Tokyo - Nikkei 225: DOWN 4.7 percent at 21,610.24 (close)

Hong Kong - Hang Seng: DOWN 5.1 percent at 30,595.42 (close)

Shanghai - Composite: DOWN 3.4 percent at 3,370.65 (close)

Euro/dollar: UP at $1.2381 from $1.2373 at 2200 GMT

Pound/dollar: DOWN at $1.3949 from $1.3958

Dollar/yen: UP at 109.57 yen from 109.13 yen

Oil - Brent North Sea: DOWN 76 cents at $66.86 per barrel

Oil - West Texas Intermediate: DOWN 76 cents at $63.39