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US stocks plummeted on Monday, adding to the losses over the previous week as concerns over financial stability and growth shifted key indices in Italy and China.
The Dow Jones Industrial Average Index dropped 98 points, or 0.4%, to 26,349 shortly after the opening bell. The S & P 500 lost 0.3% and the Nasdaq Composite, 0.6%.
US government bond yields reached their highest level since 2011 last week, with data showing that the US economy was in a good position. The unemployment rate in September fell to its lowest level since 1969, according to data released Friday.
However, as yields continue to rise, some investors are retiring riskier assets, while holding risk-free assets is becoming more attractive. Higher borrowing costs could also slow the pace of economic expansion.
"Bonds are important again," said Terry Sandven, a strategist at US Wealth Bank. "The global economy is doing well and the bond market is a reflection of that."
"It also means greater pressure on stocks," Sandven said.
The US 10-year bond rate climbed to 3.227% last week, its highest level since 2011. The market was closed Monday for a holiday. Yields evolve in the opposite of prices.
In Europe, the Stoxx Europe 600 lost 1.1%. Italian equities sold and government bond yields reached a multi-year high in a context of persistent malaise around the country's budget.
Italy's 10-year note advanced by 19 basis points to 3.591%, reaching a new multi-year high, in a context of persistent political uncertainty over the country's budget. Italian stocks followed falling bond prices, with the FTSE MIB losing 2.4%.
The European Commission said on Friday that Italy's budget proposals constituted a "significant gap" with respect to the recommended fiscal policies and a "cause for grave concern", which opens the prospect of a conflict between Rome and Brussels.
The WSJ Dollar Index was up on Monday.
Photo:
Marcos Brindicci / Reuters
The euro was down 0.4% against the dollar. The WSJ Dollar Index, which tracks the greenback against a basket of 16 currencies, rose 0.2%.
Meanwhile, stocks in China had their worst day in more than three months, dragging the rest of the Asian markets down.
The benchmark Shanghai Composite Index lost 3.7%, traders and investors returning after a week of vacation.
The declines came after the Chinese central bank released nearly $ 175 billion to encourage commercial banks to increase their lending and repay their short-term borrowings, the latest effort by Beijing to boost growth amid a slowdown of the commercial struggle with the United States.
"This change should be useful but not enough for the slowdown in the economy," said analysts at Société Générale in a note addressed to customers.
Elsewhere in Asia, Hang Seng of Hong Kong lost 1.4%, while that of Kospi in South Korea fell by 0.6%.
Investors also anticipated the start of the third quarter earnings season. Major US banks, including JPMorgan, Wells Fargo and Citi, make their statements later this week.
Write to Georgi Kantchev at [email protected]
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