Stocks slump as risk-off takes hold, bonds advance

Dublin - European shares followed their Asian counterparts lower as investors continued to lock in gains in the year’s better performing assets amid a broad risk-off mood.

The dollar steadied and Treasuries climbed as focus turns to efforts to avert a US government shutdown on Saturday.

The Stoxx Europe 600 Index dropped a second day as technology and basic resource shares led the decline. In Asia, Japanese equities fell sharply as the yen rose, and Hong Kong’s Hang Seng Index slumped.

The MSCI Asia Pacific Index is set to fall for the eighth day, the longest run of losses since 2015. European bonds followed the US benchmark higher. Sterling weakened as efforts to rescue Brexit talks prompted fresh divisions in the UK Cabinet.

The euro edged lower even as an unexpected rise in German factory orders showed Europe’s largest economy will carry its strong momentum into 2018.

Global markets have succumbed to a bout of profit taking this week as traders move out of some of 2017’s biggest winners, including technology shares and emerging-market equities.

The selloff comes as investors assess US tax reform developments and wrangling over the US debt ceiling after a Republican plan to avoid a federal shutdown on Saturday were thrown into disarray by infighting.

Investors are "locking in profits earlier than usual for the year and not opening any new positions," said Andrew Clarke, director of trading at Mirabaud (Asia). "Eventually, as profit taking subsides, buying for the New Year will appear as people look toward 2018."

Elsewhere, oil declined after industry data showed US gasoline stockpiles expanded for the first time in four weeks. Australia’s dollar dropped and bonds rose as slower-than-expected growth spurred traders to delay their expectations on interest-rate increases.

Here are some of the key events facing markets in the coming days:

The European Commission College of Commissioners discusses Brexit on Wednesday and will likely make its recommendation on whether sufficient progress has been made to move negotiations onto the future relationship.

The US faces a partial government shutdown after money runs out on December 8 if Congress can’t agree on a spending bill by then. US employers probably hired at a robust pace in November as the unemployment rate held at an almost 17-year low.

The Labour Department’s jobs report on Friday may also show a bump up in average hourly earnings.

These are the main moves in markets:

Stocks

The Stoxx Europe 600 Index fell 0.5% as of 9:26am London time. The UK’s FTSE 100 Index declined 0.2%. Germany’s DAX Index decreased 0.9%. Japan’s Nikkei 225 Stock Average decreased 2% to the lowest in three weeks.

The MSCI Asia Pacific Index sank 1.3% to the lowest in almost six weeks.

The MSCI Emerging Market Index dipped 1.5% to the lowest in almost two months. Futures on the S&P 500 Index dipped 0.1% to 2 624.75, the lowest in more than a week.

Currencies

The Bloomberg Dollar Spot Index gained less than 0.05% to the highest in more than two weeks. The euro declined 0.1% to $1.1816, the weakest in more than two weeks.

The British pound fell 0.3% to $1.3396, the weakest in more than a week. The Japanese yen climbed 0.4% to 112.17 per dollar, the strongest in a week.

Bonds

The yield on 10-year Treasuries declined one basis point to 2.34%, the lowest in more than a week. Germany’s 10-year yield fell two basis points to 0.30%, the lowest in more than five months.

Britain’s 10-year yield decreased two basis points to 1.241%. Japan’s 10-year yield increased one basis point to 0.055%, the highest in five weeks.

Commodities

West Texas Intermediate crude declined 0.6% to $57.30 a barrel, the lowest in more than two weeks. Gold increased 0.2% to $1 267.75 an ounce. Copper rose 0.9% to $2.97 a pound.