(Reuters) – World shares steadied after falling to a near four-month low on Tuesday as a bounce in battered emerging market currencies and a positive start for Wall Street helped lift some of the recent gloom.
A weaker-than-expected report on U.S. factory activity had hit global equity markets and the dollar hard on Monday but European shares had clawed back most of their morning losses by the time Wall Street reopened.
After the previous session’s pounding, the S&P 500 and Dow Jones Industrial indexes opened 0.6 and 0.4 percent higher while many hard-hit emerging currencies rose from their recent lows.
U.S. factory orders released shortly after Wall Street open bolstered the fragile mood, nevertheless, there remained plenty to keep traders on edge.
The market volatility had seen Russia cancel a bond auction for the second week running, while another round of stock market bloodletting, particularly in Asia, has left MSCI’s world index .MIWD00000PUS at its lowest level since October.
“This emerging crisis does matter if it worsens because it will have an impact on global growth,” said Daniel McCormack, a strategist at Macquarie in London.
“The other thing that is that earnings are just not coming through. The market was jittery before this crisis came along, in the sense that it was worried about earnings, and this has just been the catalyst that crystallizes those worries.”
Early losses for Europe’s top shares .FTEU3 had been all but erased but the time U.S. markets opened, but it was the 4 percent plunge in Japan’s Nikkei, cementing its position as 2014’s worst performing major index, that hogged attention.
The recent turbulence has spread from vulnerable emerging markets as major economies like the United States begin to pull back the throttle on stimulus programs undertaken following the global financial crisis.
The promise of a gradual exit from ultra-loose monetary policy has boosted likely returns in developed markets but driven investors out of the emerging countries they favored while returns on U.S. and European assets fell to near-zero.
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