* World share markets add to last week's decline; volatility
* U.S. Treasury yield hits 2-year high
* Wall St extends losses; S&P 500 off more than 2 pct
* Copper near three-year low; gold, oil extend losses
By Angela Moon
NEW YORK, June 24 Global equities, bond prices
and commodities tumbled on Monday, entering another week of
heavy selling as investors fled markets on worries about the
U.S. central bank's plans to scale back its bond buying,
combined with tighter financial conditions in China.
Prices of U.S. Treasuries resumed their slide, and benchmark
yields climbed to a nearly two-year high. The S&P 500 fell more
than 2 percent, erasing all of its quarterly gains as Wall
Street joined a global selloff after concerns about a liquidity
crunch in China sent Shanghai stocks down more than 5 percent.
The shift out of assets that have benefited most from cheap
money has been sharpest in the U.S. debt market, where yields on
10-year Treasury notes spiked to two-year highs of
2.6 percent on Monday. The 10-year note yield has risen a full
percentage point in a little more than a month.
"The exit door is not that big and everyone's going at the
same time," said Justin Lederer, strategist at Cantor Fitzgerald
in New York. "This is not just about a Treasury backup, this is
a global, everyone-getting-out-of-everything."
The broad selloff added to more than $1 trillion in losses
in global equity markets in the five days ended June 21, based
on the market value of the MSCI World Index.
The U.S. stock market alone lost about $354.4 billion during
the five-day period, while the U.S. bond market erased about
$390.8 billion, measured by the market value of the BofA/Merrill
Lynch Broad Market Index.
The declines stem from the Federal Reserve's signal last
week that the era of cheap central bank money - which caused
many assets to hit record highs - was coming to an end. But they
have been exacerbated by China's battle to transition to a
Both events are unprecedented and have driven a sharp rise
in risk aversion by investors fearing a long period of
volatility across markets.
The yield on two-year U.S. Treasury notes rose to
0.433 percent on Monday, its highest level since July 2011. The
benchmark 10-year U.S. Treasury note was down 13/32,
the yield at 2.5892 percent.
This rise, and the brighter outlook for the U.S. economy,
which was behind the Fed's decision, has favored the dollar
against most major currencies. The dollar index, was up
0.2 percent at 82.556 after rising as high as 82.841, its
highest since June 5. The gains built on last week's 2.2 percent
rally, the biggest weekly rise since November, 2011.
"The hardest hit is no doubt the bond market. The decline
that we have seen in the past four weeks in the bond market
would be equivalent to a 30-35 percent decline in the stock
market, considering bonds are traditionally not volatile," said
James Dailey, senior portfolio manager at Team Asset Strategy
Fund in Harrisburg, Pennsylvania.
WALL STREET TUMBLES
U.S. stocks extended their losses on Monday, adding to the
S&P 500 index's biggest weekly decline in two months as
investors repriced shares in the wake of the Federal Reserve's
plans to withdraw its stimulus.
Investor sentiment also was hurt by a cash crunch in China,
which could further slow Chinese growth. Markets in Shanghai and
Hong Kong posted their biggest daily losses in almost four
"We are starting to see that follow-through in Asia, which
is all part of the broader narrative - the focus on a lack of
stimulus, a creeping higher in rates and the potential impact
for less liquidity globally," said Peter Kenny, chief market
strategist at Knight Capital in Jersey City, New Jersey.
The Dow Jones industrial average was down 223.22
points, or 1.51 percent, at 14,576.18. The Standard & Poor's 500
Index was down 30.29 points, or 1.90 percent, at
1,562.14. The Nasdaq Composite Index was down 57.77
points, or 1.72 percent, at 3,299.48.
As investors retreated into the dollar, share markets
tumbled, with the falls heaviest in many of the world's major
MSCI's benchmark index for stocks in the emerging world
fell 2.1 percent, extending losses for a fifth
straight day to touch one-year lows.
The rise in Treasury yields and better prospects for the
U.S. economy have undermined the attraction of emerging markets,
as China's efforts to clean up its banking system and switch to
a slower growth trajectory raises fears of greater instability.
"The China story is something that people are aware of and
keeping an eye on, but broadly people are still digesting the
comments of the Fed," RBS emerging markets analyst Mohammed
MSCI's main world equity index, which tracks
stocks in 45 countries, shed 1.8 percent to add to last week's
3.2 percent loss, its worst weekly fall since May 2012.
The concerns over China's economic health spread to mining
stocks in Europe, adding to worries about the impact of the
Fed's tapering and pushing the FTSEurofirst 300 index
of top companies down 1.5 percent.
The Euro STOXX 50 Volatility index, known as the
VSTOXX, jumped to a nine-month high, signaling a sharp rise in
risk aversion among investors.
European equity markets weakened despite data showing German
business morale picking up for a second straight month in June,
pointing to a slow recovery for Europe's largest economy.
Commodity markets were faced with the additional pressure of
the stronger dollar, which makes commodities more expensive to
investors outside the United States.
Copper dropped to its lowest price in 21 months,
while oil slipped below $100 a barrel for the first time
in three weeks.
"Global money supply will be wound back and the level of
investment in commodities like oil will be pulled back," said
Michael McCarthy, chief market strategist at CMC Markets.
Gold fell more than 1 percent, extending last week's 7
percent decline, with investors shunning gold's appeal as a