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 European stocks snapped a three-day run of gains with falls of more
than 1 percent, after most of Asia's major bourses had drooped and a
lack of excitement at Apple's new gadgets had hit Wall Street.
The latest policy response to signs of stuttering global growth came
from the Reserve Bank of New Zealand (RBNZ), which cut its benchmark
rate by 25 basis points to 2.75 percent and signaled more easing if
China's economy slows further.
That sent the New Zealand dollar down about 2 percent, back toward a
six-year low.
Risks around China growth had already been highlighted as producer
prices there fell for the 42nd straight month and car sales dropped,
in the most recent sign that deflation remains a significant risk
for the world's No. 2 economy.
"What is China going to do? That is the biggest unknown for people
at the moment," Charles Schwab managing director of Trading and
Derivatives, Randy Frederick, said.
Adding to the deflation nerves, the United Nations food agency said
world food prices saw their fastest fall since 2008 last month.
Japan's main gauge of capital spending also unexpectedly fell for a
second straight month, data from July showed, highlighting its
economic struggles.
That helped send Tokyo's Nikkei, which had leapt almost 8 percent on
Wednesday on hopes Japan would expand its already massive stimulus
program, down 2.7 percent.
Chinese stocks also ended between 1.2 percent and 1.4 percent in the
red. Hong Kong and Australian stocks both lost more than 2 percent.
The decline was not confined to Asian emerging markets. Standard &
Poor's stripped Brazil of its investment-grade credit rating on
Wednesday, further hampering President Dilma Rousseff's efforts to
regain market trust and pull Latin America's largest economy from
recession.
"I think those Chinese concerns are still front and center," Credit
Suisse equity strategist, Damien Boey, said.
"It's not just Australian banks, it's developed-world banks that are
actually taking a hit on China concerns," he said.
OIL SPILL
In Europe the mood was slightly brighter.
The fastest rise in British house prices in more than 1-1/2 years
underscored one reason why the Bank of England is one of the only
major central banks thinking about a rate hike ahead of its next
meeting.
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Germany's economy minister Sigmar Gabriel said his country remained
on a solid growth path also, helping ease worries about the impact
on Europe's largest economy of recent global volatility and euro
zone jitters over Greece.
Asia's strains however meant commodity markets were back under
pressure after something of a rebound over the last two weeks.
Brent crude oil, which has halved in price in little over a year,
was hovering at $47.24 per barrel and WTI U.S. crude was at $44.03 a
barrel, steadying after a nearly 4-percent slump late on Wednesday.
Europe's bond investors saw the market jitters and signs that the
European Central Bank will expand its stimulus program as a reason
to stock up on German Bunds.
Gold, another traditional favorite for the risk-wary investor, also
nudged up although it remained near a four-week low.
While the RBNZ rate cut was widely anticipated, the central bank
also said a further fall by the New Zealand dollar was
"appropriate", sending the kiwi buckling.
The currency last fetched $0.6278, moving back toward a 6-year low
of $0.6200 struck late in August.
The Australian dollar suffered collateral damage and retreated 0.3
percent to $0.6996 while the Turkish lira hit a new record low of
3.0620 versus the dollar amid lingering domestic political
uncertainty.
The U.S. dollar meanwhile was little changed against both the yen
and the euro at 120.60 yen and $1.1211 respectively.
(Editing by Louise Ireland)
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