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 The MSCI World equity index fell 1.3 percent to its lowest level
since July 2013, and the index's fall so far in January is already
9.9 percent, the biggest drop since 2009.
There have been steeper monthly drops only six times in the index's
28-year history, three of which occurred during the financial crisis
of 2008/2009
"I am quite pessimistic about the equity markets for the next two to
three months. I do not see a 2008-style scenario, but I do see a
bear market coming," said Andreas Clenow, hedge fund trader and
principal at ACIES Asset Management, suggesting a further 10 percent
fall to come.
U.S. crude wallowed at its lowest since 2003 after the world's
energy watchdog warned the market could "drown in oversupply". U.S.
futures shed 2.9 percent to $27.63 while Brent crude lost 2.1
percent, having slipped below $28 earlier in the session.
European shares touched their lowest level since October 2014,
following losses in U.S and Asian stock markets as the relentless
slump in oil prices continued to drag on risk assets.
The FTSEurofirst 300 fell 2.8 percent, set for its biggest single
session loss of an already turbulent 2016.
Germany's DAX, France's CAC and Britain's FTSE were all down around
3 percent and also set for their biggest fall of the year so far.
As well as oil, copper also slipped. Basic resources and energy
sector fell 3.9 and 3.6 percent respectively.
Oil shares in Europe are down 13 percent already this year, also at
their lowest levels since 2003. That has been a major weight on the
FTSEurofirst 300, which is down around 10 percent in 2016, which
investors see as "correction" territory.
U.S. stock futures were down 1.8 percent on Wednesday ahead of the
open, after Wall Street had seen its early gains on Tuesday erased
by the tumble in U.S. crude.
The safe-haven yen soared on Wednesday, as risk appetite soured,
dragging the dollar to a one-year low, as investors trimmed the
chances of more tightening by the Federal Reserve.
Demand for German Bunds, another safe-haven asset, was also high,
and the 10-year Bund yield fell to its lowest level since May ahead
of a European Central Bank policy meeting on Thursday.
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While the dollar fell against the yen, it was strong against
emerging markets, compounding the misery for many countries already
suffering from low oil prices.
Top emerging market shares fell 2.8 percent to a 6-1/2 year low,
while EM currencies were crushed. Russia's rouble hit a new record
low of 80.295 to the dollar.
"This is a different kind of dollar strength altogether ... this is
quite clearly being driven by declining risk appetite, higher market
volatility and lower commodity prices," said Aroop Chatterjee, a
director of research at Barclays in London.
"In this new world emerging markets are the ones that bear the brunt
of the dollar strength."
In Asia, stocks surrendered all of Tuesday's rare gains with MSCI's
broadest index of Asia-Pacific shares outside Japan falling 2.9
percent on the day and hitting its lowest since October 2011.
The Hong Kong stock market's benchmark index posted its single
biggest daily fall since early August, while Japan's Nikkei closed
down 3.7 percent.
Chinese markets fared only marginally better amid mounting talk that
more stimulus may be on the way, possibly before the Lunar New Year
holidays in early February.
The CSI300 index fell 1.5 percent, after rallying more than 3
percent on Tuesday. The Shanghai Composite Index eased 1 percent.
(Additional reporting by Sudip Kar-Gupta and Marc Jones in London,
Wayne Cole in Sydney and Saikat Chatterjee in Hong Kong; Editing by
Richard Balmforth)
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