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Global stocks plunge as sell-off spreads around the world

  • Japan's Nikkei 225 closed down 4.73 percent, as stocks across all sectors pulled back.
  • The pan-European Euro Stoxx 600 fell for the seventh straight session, losing 3.2 percent at the open before paring some of those losses by midday.
  • The STOXX 50 volatility index, the main gauge of market anxiety in Europe, surged 8.1 points to a high of 27.5, according to Reuters. This was its biggest spike since the September 11 attacks, according to the news agency.
Trader sits at his desk under the day's performance board that shows a dive in the value of the DAX index of companies at the Frankfurt Stock Exchange.
Thomas Lohnes | Getty Images
Trader sits at his desk under the day's performance board that shows a dive in the value of the DAX index of companies at the Frankfurt Stock Exchange.

Equity markets followed the lead set on Wall Street Tuesday with stocks in Europe and Asia seeing significant losses as sentiment turned sour.

Overnight, Japan's Nikkei 225 closed down 4.73 percent, as stocks across all sectors pulled back. Automakers, financials and technology names were lower on the day, with Toyota down 2.87 percent. The Hang Seng Index closed down by over 5 percent with heavyweight HSBC falling around 3 percent and China Construction Bank losing nearly 4 percent.

In Europe, shares hit a six-month low during the morning session. The pan-European Euro Stoxx 600 fell for the seventh straight session, losing 3.2 percent at the open before paring some of those losses by midday. At the same time, the STOXX 50 volatility index, the main gauge of market anxiety in Europe, surged 8.1 points to a high of 27.5, according to Reuters. This was its biggest spike since the September 11 attacks, according to the news agency.

Meanwhile, emerging equities slid 3 percent on Tuesday and the MSCI benchmark emerging stocks index was set for its worst daily fall since November 2016.

Dow briefly touches correction levels

Global sentiment has been rocked by a wild session on Wall Street. "Frenzy" and "panic" were just some of the words splashed on Tuesday morning headlines after the Dow Jones plummeted more than 1500 points in Monday afternoon trading — its biggest single drop in history. The Dow and S&P 500 erased their record 2018 gains, seeing their worst day since August 2011 as $4 trillion was wiped off the market.

Fears have crystallized in large part over rising interest rates following a steady uptick in U.S. Treasury yields and positive economic data.

But many don't see the ongoing global market sell-off as reason to panic, despite Wall Street's plunges. Rather, it may hold attractive buying opportunities for those with a long-term outlook. Numerous advisors are brushing off concerns, confident that not only is the apparent correction overdue, it's actually healthy and presents opportunities of its own.

The continuing route "should actually bode well for investors," Maximilian Kunkel, chief investment officer for Germany at UBS Wealth Management, told CNBC Tuesday.

"Probably it's a good moment to pick up stocks, specifically if you have a longer term horizon," Kunkel said. "Potentially this week we're likely to see a bit more volatility … But ultimately we think this rally is going to continue, based still on very, very sound fundamentals."

Indeed, this appears to be the correction that many investors have been waiting for, with many even looking forward to it. Swiss banking giant Julius Baer's CEO Bernhard Hodler told CNBC last week that, "I think we will see sooner or later a correction — hopefully it will be like a 5, 10, 15 percent correction."

'Volatile markets help long term active investors'

The bull run for equities has seen markets more highly valued than at any point in history, including 1929, 2000 and 2007, adjusted for inflation. This has been typically attributed to a combination of broad-based global growth and prolonged quantitative easing by central banks following the 2008 financial crisis.

"Volatile markets, we believe, help long term active investors because it allow you to buy the companies you want at a slightly cheaper price," Martin Gilbert, the co-CEO of Standard Life Aberdeen told CNBC Tuesday. "We sit and wait for the price to come back to what we want to pay … We would regard this as more of a buying opportunity than panicking or selling into the decline."

He and several others have called for cool heads amid the turmoil, arguing the current route is needed to bring markets back to reality.

Wharton Business School finance professor Jeremy Seigel told CNBC that investors got ahead of themselves with the Dow's all-time high of 26,616 in late January, but that this is no cause to fear a bear market. He said that thanks to the S&P 500's steady gains since the U.S. presidential election in November 2016, even a 10 percent decline "isn't a disaster."

J.P. Morgan Asset Management's Chief Market Strategist for Asia Pacific, Tai Hui, agrees.

"It's healthy and normal for equity markets to experience pullbacks – average annual drawdowns in any given year can easily exceed 10 percent and on average still deliver positive total returns on a full year basis," the strategist said.