NEW YORK Stock markets worldwide fell on Tuesday after weak Chinese factory data and a surprise rate cut by Australia's central bank unnerved investors, sending benchmark Treasury yields to nearly two-week lows.
Activity at China's factories shrank for the 14th straight month in April as demand stagnated, a private survey showed. The data contributed to a drop in oil prices on demand worries, given the country's status as a major oil importer.
U.S. shares gave back Monday's gains. The drop in oil prices helped push the S&P 500 energy index .SPNY down more than 2.3 percent, making it the leading decliner among the 10 major S&P sectors. Financial shares were also a top decliner, with the S&P financial index down more than 2 percent.
The Reserve Bank of Australia cut interest rates to a record low of 1.75 percent, the first easing in a year. The cut added to investors' uneasiness surrounding central banks' attempts to boost growth through aggressive policy easing.
"The negative news out of China, and Australia having to stimulate its economy again, is spooking the market today," said Peter Cardillo, chief market economist at First Standard Financial in New York.
European shares fell to three-week lows, with Germany's Commerzbank (CBKG.DE) leading decliners after a slump in profits, while the weak Chinese factory data pushed down mining companies. European banking shares broadly .SX7P slumped around 3.5 percent.
The Chinese economic data and RBA rate cut fanned worries about the health of the global economy, in turn pushing yields lower and boosting prices on safe-haven U.S. government debt.
MSCI's all-country world equity index .MIWD00000PUS was last down 5.12 points, or 1.27 percent, at 399.05.
The Dow Jones industrial average .DJI was last down 190.49 points, or 1.06 percent, at 17,700.67. The S&P 500 .SPX was down 23.75 points, or 1.14 percent, at 2,057.68, and the Nasdaq Composite .IXIC was down 59.43 points, or 1.23 percent.
Europe's broad FTSEurofirst 300 index .FTEU3 dropped 1.54 percent at 1,321.59.
Yields on U.S. Treasuries maturing in five, 10, and 30 years hit their lowest levels since April 20, with benchmark 10-year yields US10YT=RR hitting a session low of 1.784 percent. Two- and three-year yields hit their lowest levels in more than two weeks, at 0.742 percent and 0.891 percent, respectively.
"I think people are realizing monetary policy is at its maximum point ... and growth doesn't look like its accelerating," said Priya Misra, head of global rates strategy at TD Securities in New York.
In addition to concerns over demand, oil prices fell as rising output from the Middle East and North Sea renewed concerns about global oversupply. Brent crude LCOc1 was last down 2.12 percent at $44.86 a barrel. U.S. crude CLc1 was last down 2.55 percent, at $43.64 per barrel.
The dollar was last down 0.19 percent against the yen at 106.19 yen, near the 18-month low of 105.55 yen JPY=. The yen gained on doubts the Bank of Japan would intervene to stem its dramatic rise, which has undermined attempts to reflate the developed world's third-biggest economy.
Spot gold prices XAU= were last down 0.42 percent, at$1,285.81 an ounce.
(Additional reporting by Tanya Agrawal in Bengaluru and Dion Rabouin in New York; Editing by Nick Zieminski)
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Updated Date: May 04, 2016 00:15 AM