Global stocks tumbled the most since June, as the biggest drop in emerging markets in two months prompted investors to seek havens in Treasuries, German bunds and yen. Natural gas reached a three-year high.
The MSCI All-Country World index fell 1.9%. The Standard & Poor's 500 index slid 38.17 points, or 2.09% to close at 1,790.29, and the Dow Jones industrial average, which posted its biggest weekly drop since 2012, fell 318.24 points, or 1.96%, to close at 1,5879.11. The MSCI Emerging Markets index tumbled 1.4%, extending its 2014 decline to 5.2%. All numbers are preliminary.
The yen rose as emerging markets currencies had the worst sell-off in five years. Ten-year Treasury yields slipped to an eight-week low. The yield on 10-year Treasury notes fell five basis points to 2.73% and touched 2.7%, the lowest since November. Natural gas surged above $5 for the first time since 2010 on forecasts for cold weather in the U.S.
Stocks retreated this week as signs of weakness in China's economy added to concern over the impact of cuts to the U.S. Federal Reserve's stimulus program. China's banking regulator ordered its regional offices to increase scrutiny of credit risks in the coal-mining industry, said two people with knowledge of the matter, signaling government concern about possible defaults.
“The current environment is potentially very toxic for emerging markets,” Eamon Aghdasi, a strategist at Societe Generale in New York, said in a phone interview. “You have two very troubling things: uncertainty about the Fed policy, combined with concerns about growth, particularly in China. It's difficult to justify that it's time to go out and buy emerging markets at the moment.”
The S&P 500 and the Dow on Friday fell the most since August. The Dow posted its worst weekly loss since May 2012, with a 3.1% drop. The gauge is down 3.8% for the year. The S&P 500 declined 2.3% this week, bringing its slide for 2014 to 2.8% — its worst start to a year since 2008.