LONDON Jan 27 Emerging markets led a global
sell-off in risky assets on Monday as European stocks followed
sharp falls in Asia and safe-haven assets such as the yen and
Concerns about China's economic slowdown and its shadow
banking sector, coupled with expectations the Federal Reserve
would scale back its bond buying further, are piling pressure on
emerging markets dependent on external financing.
Political risks in Ukraine, Turkey and Thailand as well as a
looming financial crisis in Argentina are compounding the
problem of emerging markets in a week when the Fed is expected
to cut its monthly bond purchases by another $10 billion.
In Europe, a German media report which cited an OECD study
that showed European banks have a combined capital shortfall of
about 84 billion euros also hit sentiment.
"Sudden fears about emerging markets and also potential
capital shortfalls for some European banks are rattling
investors. People have been a bit complacent lately, so it's
quite logical to get a correction," said David Thebault, head of
quantitative sales trading, at Global Equities.
MSCI world equity index fell 0.6 percent,
its lowest in more than a month, following Asia's decline
of 1.6 percent.
The benchmark emerging stock index hit a 4-1/2
month trough, falling 1.6 percent on the day. Emerging stocks
are the worst performing asset so far this year, with
year-to-date losses of 5.2 percent.
U.S. stock futures are pointing to a firmer open,
after the S&P 500 index posted its worst week since June
2012 last week.
European stocks are down 0.6 percent. Banking
stocks lost more than half a percent.
"There's a sea of red in Asia and that spills over into
Europe and should give some support to safe-haven assets," said
Nick Stamenkovic, bond strategist at RIA Capital Markets.
The yen hit a seven-week high of 101.77 per dollar
while gold also rose to a two-month high above $1,278 an ounce.
The 10-year U.S. Treasury yield hit a new
two-month low of 2.7333 percent.
Bund futures are down 6 ticks.
The dollar was slightly weaker against a basket of