Signs of distress in financial markets accumulated amid deepening concern over the health of the global economy, sending indices in the US and Europe sharply lower.
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European shares have plunged to 16-month lows, extending an aggressive sell-off, as investors shed risky assets on persistent concern over the pace of growth.
Mining and banking stocks drove the Standard & Poor's 500 Index to its lowest close since April 2014, while equity benchmarks in Germany, France and Spain dropped at least 3.2 per cent.
The Dow Jones industrial average closed down 177.92 points, or 1.1 percent, to 16,027.05, the S&P 500 lost 26.61 points, or 1.42 percent, to 1,853.44 and the Nasdaq Composite dropped 79.39 points, or 1.82 percent, to 4,283.75.
Local shares look set to follow the tone set in Europe and on Wall Street, with SPI futures down 1.2 per cent around 8.45am in Sydney.
Investors around the globe sought the safest assets, sending yields on Treasury 10-year notes to the lowest level in a year, and those on Germany's 10-year bunds to the lowest since April. Meanwhile, yields on bonds of Europe's most-indebted countries rose, while the cost of protecting against default by US junk-rated companies climbed to the highest since 2012.
Oil slid under $US30 a barrel and spot gold advanced for a seventh day, the longest winning streak since March.
"We're still seeing selling pressure from the tech valuation resetting last week, as well as the drop in oil," said Matt Maley, an equity strategist at Miller Tabak & Co in New York.
"But it's not just a problem with technology and some of the high-flyers that have rolled over in recent days, but also the recent stresses in the credit markets."
US stocks sank last week, as concern about everything from China to oil and interest rates spurred strategists to lower their year-end projections for equities.
In Europe, data overnight showed the Sentix investor confidence index dropped to the lowest level in more than a year in February.
Oil failed to hold gains after Saudi Arabia held talks Sunday with Venezuela, which is trying to drum up support for a coordinated oil-output cut to buttress prices. Most Asian markets were closed for the lunar New Year holidays.
The S&P 500 fell 1.4 per cent to 1853.44 as of 4pm in New York. The Nasdaq 100 Index slid for a fifth day, closing at its lowest level since October 2014, while the Nasdaq Composite Index capped a 19 per cent drop from its July record, leaving the technology-heavy gauge on the precipice of a bear market.
Bank shares contributed among the biggest losses Monday, with Bank of America Corp and Citigroup Inc tumbling more than 5 per cent, while Wells Fargo & Co and JPMorgan Chase & Co sank by at least 2 per cent. Energy stocks rose 0.1 per cent, the only gainers among 10 industry groups, as Chevron Corp to Exxon Mobil Corp rallied.
The S&P 500 declined last week for the first time in three, with a jobs-day tumble on Friday turning into a full-blown selloff. A rout in high-valued software and Internet companies continued on Monday with Facebook Inc falling 5.5 per cent today after its steepest retreat in more than a year.
While the S&P 500's valuation of 15.3 times forecast earnings is in line with the average of the past five years, the measure has plunged 12 per cent since the start of the year. The gauge remains more expensive than developed markets in Europe, where the Stoxx Europe 600 Index trades for 13.8 times estimated earnings.
The Stoxx 600 slid for a sixth day, declining 3.5 per cent to the lowest since 2014. Greece's ASE Index sank 7.9 per cent to the lowest since 1990 as banks tumbled.
The MSCI Emerging Markets Index fell 1 per cent, extending last week's decline. Benchmark gauges in Russia, Turkey and Poland slid at least 1.2 per cent while India's Sensex dropped 1.3 per cent.
Markets closed today include those in China, Hong Kong, Indonesia, Malaysia, the Philippines, Singapore, South Korea, Taiwan, Brazil and Argentina.
China reported on Sunday its foreign-exchange reserves shrank $US99.5 billion in January to $US3.23 trillion, the smallest level since 2012.
Treasuries climbed, as they continued to benefit from speculation a weaker global and domestic economy will delay an interest-rate increase by the Federal Reserve. Yields on 10-year Treasury notes fell ten basis points, or 0.1 percentage point, to 1.74 per cent.
The risk premium on the Markit CDX North American High Yield Index, a credit-default swaps benchmark tied to the debt of 100 junk-rated companies, surged more than 27 basis points to 577 basis points, the highest level since 2012.
Germany's government bonds advanced, pushing the two-year yield to the lowest on record. Meanwhile, Portugal led a drop in the bonds of Europe's higher debt and deficit nations.
Germany's two-year note yield touched minus 0.519 per cent, the lowest since Bloomberg began compiling the data in 1990. Portugal's 10-year bond yield rose 25 basis points to 3.36 per cent, the highest since October 2014.
The Markit iTraxx Europe Senior Financial Index of credit-default swaps rose as much as 19 basis points to 140.04 basis points. An index of swaps tied to junk-rated companies increased for a sixth day, the longest run since October 2014.
Oil fell for a third day after no supply agreement emerged from Venezuela's tour of crude-producing nations. Saudi Arabian Oil Minister Ali al-Naimi met his Venezuelan counterpart Sunday in Riyadh, the Middle East nation's Petroleum Ministry said in a statement, without mentioning any steps to shore up the market.
West Texas Intermediate crude dropped 3 per cent to $US29.96 a barrel and Brent slid 2.6 per cent to $US33.18.
"The Saudis are the main obstacle to a cut," said Ole Hansen, head of commodity strategy at Saxo Bank. "They are buying time while we wait for the solid proof that US production is slowing."
Gold climbed 2 per cent to $US1196.95 an ounce, the highest level since June. Silver jumped 2.6 per cent to the highest level since November. Copper dropped 0.4 per cent, while zinc and lead advanced amid signs of tightening supplies.
The yen gained by at least 0.7 per cent against all 16 major counterparts, advancing to 115.46 per US dollar.
The euro advanced 0.3 per cent to $US1.1192, while the Bloomberg Dollar Spot Index slid 0.2 per cent, reversing an earlier gain.
Mexico's peso, Russia's ruble and South Africa's rand led emerging-market currencies lower, falling at least 1.1 per cent against the dollar.