Stocks tumbled Wednesday on growing concerns about emerging market economies, adding to the uncertainty stoked by U.S. President Donald Trump's trade rows with China and Canada.
After Turkey and Argentina's recent headline-making problems, South Africa became the latest EM country to spark panic with data Tuesday showing a shock plunge into recession for the one-time economic starlet.
The news sent the rand sliding in a similar way to the Argentine peso and Turkish lira in recent weeks. Observers increasingly fear the problems could spread to other EM countries and possibly spill over into major economies.
"Stock markets are lower across the board in Europe as trade tensions and concerns about emerging market currencies weigh on sentiment," said David Madden, analyst at CMC Markets UK.
"Asian equity markets saw a severe sell-off as there is speculation that President Trump will step up the trade spat with China by announcing more tariffs."
The brewing EM crisis meanwhile has seen currencies in a number of emerging markets -- in particular those with deep current account deficits -- take a hammering.
India's rupee was sitting at a record low and the Indonesian rupiah at levels last seen during the 1998 Asian financial crisis.
Indonesia said it would take unspecified action against currency speculators and announced plans to delay import-heavy energy projects to focus efforts on reducing imports and supporting the rupiah.
"South Africa is back in recession and that was not expected," said Greg McKenna, chief market strategist at AxiTrader.
"The big question is whether this is a... tipping point for EM markets and if the idiosyncratic issues are now adding up to something more structurally pernicious for EM markets. My guess? Yes, it is."
Adding to selling pressure on emerging market currencies is the U.S. economy's continuing strength, which is forcing the Federal Reserve to raise interest rates. This leads investors to seek better and safer returns in the U.S.
Data showing an index of U.S. manufacturing activity hitting a 14-year high bolstered expectations the Fed will continue to increase borrowing costs. Crucial U.S. jobs data is due out on Friday.
On trade meanwhile, a public consultation period ends this week on Trump's proposal to impose tariffs on $200 billion of Chinese imports, on top of the $50 billion already being hit.
While the two sides have held low-level talks there are fears the measures will be implemented, which would spark a retaliation from Beijing and push the world's top two economies closer to an all-out trade war.
Eyes are also on the resumption Wednesday of talks between the U.S. and Canada aimed at salvaging the North American Free Trade Agreement as a three-country pact.
Optimism sparked by Mexico's deal last week with Washington was soon tempered by the failure to close a deal between the U.S. and Canada, with Trump threatening to leave Ottawa out of the pact altogether.
Canadian Prime Minister Justin Trudeau stressed that no deal is better than a bad deal for his country.
- Key figures around 1030 GMT -
London - FTSE 100: DOWN 0.5 percent at 7,423.36 points
Frankfurt - DAX 30: DOWN 0.6 percent at 12,140.18
Paris - CAC 40: DOWN 1.04 percent at 5,287.09
EURO STOXX 50: DOWN 0.8 percent at 3,333.60
Tokyo - Nikkei 225: DOWN 0.5 percent at 22,580.83 (close)
Hong Kong - Hang Seng: DOWN 2.6 percent at 27,243.85 (close)
Shanghai - Composite: DOWN 1.7 percent at 2,704.34 (close)
New York - Dow: DOWN 0.1 percent at 25,952.48 (close)
Euro/dollar: DOWN at $1.1557 from $1.1600 at 2100 GMT
Pound/dollar: DOWN at $1.2820 from $1.2900
Dollar/yen: DOWN at 111.43 yen from 111.45 yen
Oil - Brent Crude: DOWN 90 cents at $77.27 per barrel
Oil - West Texas Intermediate: DOWN $1.07 at $68.80
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