Oct. 24 (Bloomberg) — Global stocks from Seoul to Stockholm tumbled to the lowest since August 2003 on concern the deepening economic slump will damage earnings. Oil dropped to a 16-month low and the yen reached the highest since 1995 against the dollar.
The Standard & Poor’s 500 Index lost 3.5 percent, a smaller decline than European and Asian equities, even after futures on the U.S. measure fell so far that trading was curbed. The U.K.’s FTSE 100 Index sank 5 percent and the pound had the biggest drop versus the dollar since 1971 following a government report showing the economy shrank for the first time in sixteen years. South Korea’s economy grew at the slowest pace in four years, driving the Kospi Index down 11 percent.
“There’s a worldwide fear of a worldwide recession,” said Michael Binger, Minneapolis-based fund manager at Thrivent Asset Management, which oversees about $70 billion. “The concern has moved to being about which banks and companies will fail to which countries could fail, with Iceland and some of the smaller countries around the world being on life support.”
The MSCI World Index of developed markets declined 4.3 percent to 871.64. MSCI’s emerging-markets benchmark fell 7.8 percent to 473.98, completing eight straight weeks of losses, the longest stretch since 1998. The MSCI index covering both regions slumped to the lowest since August 2003. Russia’s Micex Stock Exchange halted trading until next week following today’s 14 percent retreat.
$10 Trillion
More than $10 trillion has been erased from the market value of equities so far this month. That accounts for about one-third of the total value wiped off world equities this year. MSCI’s measure tracking both developed and emerging markets is heading for the worst year on record, plunging 47 percent in 2008, amid $660 billion in global credit-related losses and the biggest financial crisis since the Great Depression.
The Chicago Board Options Exchange Volatility Index surged to 79.13, the highest in its 18-year history. The VIX measures the cost of using options as insurance against S&P 500 declines.
“We’re getting very close to the emotional blow-off where everybody says, `I don’t care; I want out,”’ said E. Craig Coats Jr., who co-heads fixed income at Keefe, Bruyette & Woods Inc. in New York. “Everybody seems to be saying `I want to be in cash or Treasuries.”’
More than 200 companies in the S&P 500 have reported quarterly results since the start of October, posting an average profit slump of 23 percent, according to Bloomberg data.
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