Monday was a rough day for the world’s financial markets amid fears that the US central bank – the Federal Reserve – could raise interest rates again as early as next week when policymakers meet on September 20/21.
Share price indexes in Europe at one staged tumbled by the most since just after the UK voted in June to leave the European Union.
At the close London’s FTSE 100 was down 1.12 percent, the DAX in Frankfurt was 1.34 percent lower and in Paris the CAC 40 had slipped 1.15 percent.
US stocks also opened lower in New York before turning positive, thanks to gains by technology companies – particularly Apple – and as some bargain hunters moved in to buy up cheaper shares.
But investors are anxiously looking at statements by Fed officials for clues about when they might put up the cost of borrowing.
After the Dow Jones Industrial Average in the US fell two percent on Friday, Asian markets slumped as they kicked off the week’s trading on concerns the Bank of Japan and the European Central Bank could be slowing their stimulus efforts.
Hong Kong’s benchmark stock index fell more than three percent on Monday, its biggest one-day drop in seven months.
Have we reached the limit?
This all comes with the question being asked whether central banks have reached the effective limit of their stimulus measures.
“It’s a pretty broad-based sell-off on an increasing view that perhaps central banks are going to draw back from providing ever more easing,” said RBC European economist Cathal Kennedy.
“The BoJ and the ECB … are questioning the effectiveness of their own policy. Add to this an increasing probability that the Fed will raise rates sooner rather than later.”
Oil was another casualty of the nervousness amid a continued glut of crude. At one stage on Monday it was down another two percent on top of Friday’s four percent fall but picked up as the day went on.
And Hillary Clinton being diagnosed with pneumonia after she fell ill at a 9/11 memorial ceremony did not help with even the suggestion that the Democratic candidate might not be the next US president sending investors into sell-off mode.
Markets have generally not truly considered the implications, both economic and for national security, should her rival Donald Trump prevail.
Gold steadied on Monday with investors looking for a safe haven for their money.