A wave of selling gripped global markets as the rout in all but the safest assets deepened.
Chinese shares tumbled by the most since 2007, stocks in Germany headed for a bear market and commodities fell to a 16-year low. Russia’s ruble led a selloff in emerging-market currencies, while the yen strengthened and 10-year Treasury yields slid below 2 percent.
“This is a real disaster and it seems nothing can stop it,” said Chen Gang, Shanghai-based chief investment officer at Heqitongyi Asset Management Co.
More than $5 trillion has been erased from the value of global equities since China unexpectedly devalued the yuan, fueling concern that the slowdown in the world’s second-largest economy may be deeper than previously thought. The rout is shaking confidence that the global economy will be strong enough to withstand higher U.S. interest rates, even as bets on a September liftoff retreat.
Developing economies took the brunt of the selloff, with the MSCI Emerging Markets Index sliding 4.2 percent at 9:13 a.m in London, headed for the biggest one-day drop since September 2011. Brent crude tumbled through $45 a barrel and oil in New York traded below $40. Treasury 10-year note yields fell as low as 1.97 percent.
The Stoxx Europe 600 Index slid 2.8 percent, taking its loss through the last four days close to 10 percent. Germany’s DAX Index retreated 2.4 percent, taking the decline from its peak in April to more than 20 percent. Standard & Poor’s 500 Index futures dropped 1.9 percent, signaling the gauge will fall for a fifth day.
Doug Ramsey, the chief investment officer of Leuthold Weeden Capital Management LLC who foreshadowed the drubbing in American stocks last week, said Sunday that losses in the S&P 500 could reach 20 percent.
The Shanghai Composite Index slid 8.5 percent and Hong Kong’s Hang Seng Index fell 5.8 percent, tumbling further into a bear market. The measure is about 25 percent below an April high, with a gauge of price momentum dropping to the lowest since the October 1987 stock-market crash.
Greater China equities plummeted, with Taiwan’s benchmark gauge dropping as much as 7.5 percent and the Shanghai Composite -- whose members are restricted from falling more than 10 percent per day -- at one point heading for its biggest one-day retreat since 1996. More than $4 trillion was wiped from the value of Chinese equities from June 12 through Friday.
“Things are probably going to get worse before they get better,” Nader Naeimi, head of dynamic asset allocation at AMP Capital Investors Ltd. in Sydney, which oversees about $118 billion, said by phone. “You really need rate cuts and more policy easing in China. In the meantime, things can get worse. We’ve got to see more clarity around the Fed.”
The yen advanced with the euro as Treasuries rallied amid speculation the global selloff will forestall the Federal Reserve’s first interest-rate increase since 2006. U.S. notes due in a decade paid as little as 1.99 percent, the lowest since April 29.
The Bloomberg Dollar Spot Index, which tracks the U.S. currency against 10 of its most-traded peers, fell 0.2 percent. The yen jumped 0.8 percent to 121.13 per dollar, the strongest since July 9. The euro advanced 0.6 percent to $1.1458.
Gold dropped 0.5 percent to $1,154.39 after capping its biggest weekly advance since January.
Fed funds futures now show a probability of a December rate increase at 55 percent versus 61.1 percent on Friday. Bets on liftoff in September fell to 28 percent, down from 34 percent.
The Bloomberg Commodity Index fell 1.7 percent, heading for the lowest closing level since 1999. Brent crude slipped below $45 a barrel for the first time since March 2009, while a barrel of U.S. crude traded at $39.18. Copper lost 2.6 percent.
The rand led commodity-producing nation currencies lower, as the nation’s major stock gauge plunged the most in at least five years. The Australian dollar dropped 0.9 percent and New Zealand’s currency weakened 1.2 percent.
Malaysia’s ringgit slid 1.6 percent to a fresh 17-year low, while India’s rupee tumbled 1.2 percent to levels last seen in September 2013.
Turkey’s lira retreated 1.1 percent. A deadline for Turkey to form a coalition government passed, putting the country on course for its second parliamentary election this year and adding to a global selloff.