World equity markets tumbled and gold shot to a new record high on Thursday as renewed worries about Europe’s debt crisis and sour US data added to fears that major economies were close to recession.
Aversion to risk swept financial markets, with corporate bonds, industrial commodities and higher-yielding currencies sliding and assets viewed as safe-havens, such as gold, government bonds and the dollar, gaining.
Gold rallied to its second record high in a week. Spot gold hit a record $1,817.90, although it is still off its inflation-adjusted peak above $2,000 struck in 1980.
The US dollar and yen firmed as global growth anxiety and worries about European banks drove investors to the relative safety of both currencies.
The ICE Futures dollar index was up 0.7 percent at 74.197 while the euro fell 0.6 percent to $1.43348, tracking a more than 4 percent fall in European shares.
“We have much lower risk appetite today and that’s why we’re seeing the dollar strengthen,” said Ray Attrill, senior currency strategist, at BNP Paribas in New York.
“Stocks are down across the board and that may be due to some global growth worries,” Attrill said.
US stocks tumbled more than 3 percent in early trading, pulled lower by bank shares after The Wall Street Journal reported that regulators were intensifying their review of the US units of European banks.
The sell-off “is rooted in the European banking system,” said Jack de Gan, chief investment officer at Harbor Advisory Corp in Portsmouth, New Hampshire.
“It reflects continued concern that sovereign debt issues indicate we’re going to have to bail out all those banks again. And if there’s stress in major European banks, it will affect US banks too.”
Sentiment worsened as the Philadelphia Federal Reserve said factory activity in the US Mid-Atlantic region plummeted in August, falling to the lowest level since March 2009. Separate government data showed the number of Americans claiming new jobless benefits rose last week.
The Dow Jones industrial average was down 331.00 points, or 2.90 percent, at 11,079.21. The Standard & Poor’s 500 Index was down 37.99 points, or 3.18 percent, at 1,155.90. The Nasdaq Composite Index was down 94.26 points, or 3.75 percent, at 2,417.22.
US Treasury prices gained as fears over a global growth slowdown intensified,
The benchmark 10-year US Treasury note was up 34/32 in price and its yield slumped to 2.05 percent.
Crude prices tumbled on the prospect of declining demand.
Brent fell 2.5 percent to $107.82 a barrel, while US light sweet crude oil 3.95 percent to $84.12 a barrel.
Spot gold prices rose $24.30 to $1,812.40 an ounce.