Bond yields tumble as Netflix fuels stock market sell-off

The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, September 5, 2018. REUTERS/Staff/File Photo

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  • Stocks drop in Europe, Asia after Wall Street sell-off
  • Oil prices fall further away from 7-year highs
  • Treasury yields drop as investors seek safety
  • Graphic: Global asset performance
  • Graphic: World FX rates

NEW YORK/LONDON, Jan 21 (Reuters) – Risk aversion dominated markets on Friday as stocks slumped on Wall Street and in Europe, oil prices fell from seven-year highs earlier in the week and bond prices surged with traders scurrying for the relative safety of government debt.

Concerns about how aggressively the Federal Reserve will tighten monetary policy shook investors, as did poor subscriber growth reported late Thursday at Netflix Inc cast a pall over the market and sent its shares plunging 21%.

The Nasdaq, the standout performer of the stock market boom since the pandemic began, has fallen more than 10% from a November all-time high and is poised for its worst week since markets crashed in March 2020.

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With expectations the Fed will raise interest rates up to four times this year and also reduce its balance sheet, fear of a hard landing has risen among investors.

But a slowing economy in the months ahead will probably give the Fed second thoughts, said Steven Ricchiuto, U.S. chief economist at Mizuho Securities USA LLC.

“By the time we get to the second rate hike, everything will be rolling over enough that everybody will back off from these calls,” he said. “The growth numbers will be slowing much more quickly than the Fed anticipated.”

U.S. Treasury and euro zone government bond yields fell as concerns about potential conflict in Ukraine also dented risk appetite and stock market drops increased demand for the debt.

The yield on 10-year Treasury notes was down 9.4 basis points to 1.740%, a sharp drop from a two-year high of 1.902% touched on Wednesday.

In Europe, the German, French and Italian indices fell almost 2%, with the broad Euro STOXX index (.STOXX) of 600 leading regional companies closing down 1.84%. MSCI’s all-country world index (.MIWD00000PUS) fell 1.37%.

On Wall Street, the Dow Jones Industrial Average (.DJI) slid 1.20%, the S&P 500 (.SPX) fell 1.74% and the Nasdaq Composite (.IXIC) lost 2.39%.

Markets in Asia were broadly lower, including in China where benchmark mortgage rates were cut on Thursday in the latest move to prop up an economy soured by its property sector. read more

But the sharpest drops in recent days have been in U.S. markets, with the benchmark S&P 500 heading toward its worst month since late 2020.

S&P 500 stock index set for biggest weekly fall since late 2020

The U.S. dollar edged lower with U.S. Treasury yields, with investors looking to next week’s Fed meeting for more clarity on the outlook for rate hikes and quantitative tightening.

The dollar index , which tracks the greenback versus a basket of six currencies, fell 0.104%, to 95.661. The yen was last down 0.39% at $113.6400. The euro was last up 0.25%, at $1.1338

Oil prices slid for a second day, pressured by an unexpected rise in U.S. crude and fuel inventories while investors took profits after global oil benchmarks touched seven-year highs.

Brent crude futures fell 49 cents, or 0.6%, to settle at $87.89 a barrel, while U.S. futures settled down 41 cents at $85.14 a barrel.

Gold was set to gain for a second week as inflation and geopolitical risks lifted its safe-haven appeal, but it slipped on Friday amid a broader decline in commodities.

U.S. gold futures settled down 0.6% at $1,831.80 an ounce.

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Reporting by Herbert Lash, dditional reporting by Sujata Rao in London and Kanupriya Kapoor and Stella Qiu in Singapore; Editing by Raissa Kasolowsky, Kirsten Donovan, Alexander Smith and Jonathan Oatis

Our Standards: The Thomson Reuters Trust Principles.

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