U.S. Market Slump Easing; Europe and Asia still sliding

En: http://www.nytimes.com/2014/01/28/business/daily-stock-market-activity.html?_r=0

Stocks remained under considerable pressure on Monday after a steep sell-off late last week. Key indexes around the world continued to fall and emerging markets lost more ground in the face of fears of capital flight.

Wall Street showed a few signs of stabilizing after its worst week since June 2012, while markets slumped across Europe and especially in the Asia-Pacific region.

“We’re clearly favoring the developed world over emerging markets at the moment,” Philippe Gijsels, the head of research at BNP Paribas Fortis Global Markets, said. Investors had become cautious because of signs that some countries, including India, South Africa and Turkey, were having trouble.

On Monday, the Dow Jones industrial average fell 41.23 points, or 0.3 percent, to close at 15,837.88. The Standard & Poor’s 500-stock index declined 8.73 points, or 0.5 percent, to 1,781.56. The Nasdaq composite index dropped 44.56 points, or 1.1 percent, to 4,083.61. All three indexes lost 2 percent or more on Friday.

In Europe, the FTSE 100 index in London fell 1.7 percent, while the DAX index in Frankfurt slid 0.5 percent.

In Asia, the Japanese benchmark Nikkei 225 dropped 2.5 percent to its lowest close since November, while the Hang Seng in Hong Kong lost 2.1 percent. On Tuesday, the selling seemed to abate, as both indexes were marginally higher in early trading.

Investors, fretting about slowing growth in China and the prospect that the Federal Reserve will continue to scale back its support of the United States economy, bailed out of emerging market currencies.

Investors in Japan were reacting to the additional concerns about a stronger yen, which they fear may eat into earnings of Japanese exporters by making goods more expensive for customers overseas and less competitive globally.

The global sell-off started to gather pace on Thursday after weak data from the Chinese manufacturing sector reinforced concerns about the strength of the Chinese economy. Although China is still expected to expand more than 7 percent this year, its growth is far less energetic than it once was.

“Our baseline remains that China can avoid a hard landing, but the risk will remain for the foreseeable future,” analysts at Société Générale said.

Events in Turkey, Argentina and elsewhere have fanned fears about emerging markets in general over the last few days. Political turmoil in Turkey helped send the Turkish lira to a record low against the dollar last week. This week, Turkey’s central bank said its monetary policy committee would hold an emergency meeting “to take the necessary policy measures for price stability.”

All this has coincided with the prospect that the Federal Reserve will further scale back its economic stimulus program that has helped keep interest rates low worldwide. The prospect of waning stimulus has fanned fears that emerging markets around the world will now see much reduced inflows of cash as a result.

In December, the Fed decided to cut back its monthly purchases of Treasury and mortgage-backed for the first time, to $75 billion from $85 billion. It is widely expected to reduce the bond purchases by another $10 billion at a two-day policy meeting that ends on Wednesday.

In the American bond market, interest rates edged slightly higher. The yield on the Treasury’s 10-year note rose to 2.75 percent, from 2.72 late Friday, while its price fell 9/32, to 100.