Wall St swings to loss in choppy trading; bond prices rise

Dow Jones makes historic fall amid record growth

Hong Kong's Hang Seng skidded 5.1 percent and South Korea's Kospi declined 1.5 percent.

Japan's Nikkei 225 index lost 4.7 percent, closing Tuesday to 21,610.24 after a rally in the last hour shaved off some off the losses.

Singapore's STI was down 2.7 percent.

The U.S. dollar remained fairly resilient despite the stock market sell-off, which at one stage Monday saw the Dow shed 1,597 points.

THE Dow shot up 2% as a rollercoaster session approached its finale yesterday afternoon, rebounding from the huge losses of the prior session and a big drop at the open. The euro was up 0.3 percent at $1.2435 while the dollar rose 0.3 percent to 109.38 yen.

"Traders have been looking at the market for the past year moving in one direction which was skewed to the upside".

Monday's rout on Wall Street frayed investors' nerves, but it is not enough to knock the Federal Reserve off course from its intended path to further raise interest rates in 2018 as the economy continues to hum along, analysts say.

"When [people] hear about these ups and down like this, it scares some away and that's unfortunate", says USI economics professor, Tim Mahoney.

"It's settled down a little, but markets are still expecting big swings for a while", Frederick told ABC News. That is painful for Japanese and other regional export manufacturers, whose competitiveness is hurt by stronger currencies that push their prices relatively higher.

Panic gripped trading floors across the world yesterday, with Asia and Europe plunging after record-breaking losses on Wall Street, as investors fretted over the prospect of rising United States interest rates and took profits following months of markets euphoria.

The financial, energy and industrial sectors were among the biggest losers in the U.S.

Banks fared the worst as bond yields and interest rates nosedived.

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German 10-year Bund yields fell 2 bps to 0.74 percent, off nearly 2-1/2 year highs of 0.774 percent hit in early trade. It's not even a proxy for the economy. "You can't make too much out of a couple of days of craziness", Yardeni said.

Oil prices also weighed on the index, with benchmark USA crude down 1.3 per cent to $63.33 per barrel. Brent crude, which is used to price global oils, shed 73 cents to $66.89 per barrel.

The downturn may have been accelerated by the widespread use of exotic, leveraged securities that lose value when market volatility spikes, as it has in recent days.

"While we expect this pullback to eventually create opportunities for those seeking to increase equity exposure, traders should still exercise extreme patience before adding to positions, as there are few signs of capitulation at this point", Randy Frederick, vice president of trading and derivatives for Schwab said in a statement.

Meanwhile, the S&P 500 lost one per cent to 2,622 points.

In the Middle East, stocks were touched by the USA and Asian markets' sell-off, though the losses were more limited. The Nasdaq composite was down 6 points, or 0.1 percent, to 6,956. In contrast, since 1928, the market has suffered an average of 3.4 annual drops of 5% or more, according to Bespoke Investment Group.

The slump began Friday as investors fretted that creeping signs of higher inflation and interest rates could derail the US economy along with the market's record-setting rally.

But Benjamin Reitzes of BMO Capital Markets highlighted in a note that while the points decline was a record, "on a percentage basis, it's the 28th largest drop since 1947".

"If investors had been waiting for an opportunity to take profits, the prospect of higher than expected inflation and tightening by the Fed provided just that", added Richard Hunter, head of markets at online stockbroker Interactive Investor.

At its lowest ebb, the Dow was down 1,597 points from Friday's close.

Oil majors BP and Royal Dutch Shell also took a sizeable chunk out of the blue-chip index as the rout in equities sent crude prices tumbling.

In the USA, unemployment is at a 17-year low. A drop of 10 percent from a peak is referred to on Wall Street as a "correction".

Bond prices tumbled after moving sharply higher on Friday.

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