Updated Jan. 15, 2016 9:15 a.m. ET
U.S. stock futures slid and the 10-year Treasury yield dipped below 2% as steep declines in oil prices and Chinese equities heightened anxieties that have pushed markets around the world lower this year.
Stock futures pointed to a 2.4% opening loss for the S&P 500. Changes in futures don’t necessarily reflect market moves after the opening bell.
The Stoxx Europe 600 dropped 2.8%, dragged lower by energy and mining firms as Brent crude oil fell below $30 a barrel.
Asian stocks closed lower, with China’s Shanghai Composite Index falling 3.6% to enter bear-market territory, having lost 20% from a high in late December.
Government bonds gained, as investors moved into assets perceived as safe. The 10-year Treasury yield fell to 2.003% from 2.100% on Thursday. Yields fall as prices rise.
European Pressphoto Agency
“Everyone is focused on China volatility and energy volatility, and that’s swamping the larger story,” said Dennis Mitchell, senior portfolio manager at Sprott Asset Management.
Concerns about the world’s No. 2 economy, its weakening currency and turmoil in its stock markets have kept investors shy of risky assets in what has been a highly volatile start to the year.
The latest fall in China’s stock market followed a state-run media report that some Chinese banks were no longer accepting stocks as collateral for loans. At the same time, official data also showed weak demand for bank loans.
“People are not confident [China’s] markets are stable and believe there’s more of a storm to come,” said Craig Erlam, an analyst at Oanda.
Compounding jitters, U.S. crude oil tumbled 4.6% to $29.76 a barrel. Oil prices have lost around 20% this year amid concerns that the onset of Iranian exports after sanctions are lifted could add to the current glut of supply, as fears around Chinese demand have also added to the pressure on oil and base metals prices.
In the U.S., stock futures extended losses after a round of U.S. economic data.
Sales at retail stores and restaurants slipped 0.1% from the prior month to $448.1 billion in December, the Commerce Department said Friday, meeting expectations. Sales grew just 2.1% in 2015 compared with a year earlier, marking the slowest increase in this economic expansion.
The producer-price index fell 0.2% in December, the Labor Department said, underscoring persistently low inflation in the U.S. Excluding the volatile food and energy categories, core prices rose 0.1%. Economists surveyed by The Wall Street Journal had expected overall prices to fall 0.2% and core prices to rise 0.1%.
In Europe, the China-sensitive basic-resources sector fell 5.6%, while the energy sector fell 3.5%. Shares in mining company Anglo American
PLC were down 9.3% as it struggled with the prolonged slump in commodity prices.
While lower gasoline prices should benefit the economy as it encourages spending, “we haven’t yet seen evidence the consumer is spending more,” said Mr. Erlam. Later Friday, investors will look out for U.S. retail sales data as well as a reading on consumer sentiment.
Meanwhile, the steep falls in oil have raised the specter of bankruptcies in the energy sector and added to pressure on commodity-dependent economies, hitting broader equity markets.
Markets throughout Asia fell Friday, echoing the downbeat tone from Shanghai. Japan’s Nikkei Stock Average lost 0.5%, Hong Kong’s Hang Seng Index lost 1.5% and Australia’s commodity-heavy S&P ASX 200 fell 0.3%.
The dollar fell 1.2% against the yen to ¥116.77, while the euro jumped 1% against the dollar to $1.0967. Gold surged 1.9% to $1094.10 an ounce.
Friday’s moves came after Wall Street saw its biggest one-day gain of the year on Thursday, as investors stepped in to buy up hard-hit corners of the market after a bruising start to the year.
Mr. Mitchell said he expects the fourth-quarter earnings season to show weakness for energy companies and multinationals, but he still believes markets will regain their composure later this year as oil prices find a floor, and people realize “China isn’t going to implode.”
In earnings news, Citigroup said Friday that fourth-quarter profit jumped as legal costs fell and revenue rose. Shares declined 3.9% in premarket trading.
Wells Fargo & Co. said its fourth-quarter profit was flat compared with the year-ago period, as the bank continued to wrestled with a slump in oil prices. Shares fell 3.6% premarket.
The nervousness that has characterized markets in recent sessions also comes as the Federal Reserve is tightening monetary policy, after ultralow interest rates boosted asset prices in developed markets for years.
“The central bank investment story is slowly falling apart, leading to a turn in investor confidence,” said Benedict Götte, partner at Crossbow Partners AG, adding that he expects to see big price swings.
—Chao Deng and Saumya Vaishampayan contributed to this article.
Write to Riva Gold at [email protected]
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