The ongoing selling pressure has dragged on global markets, with developed market country-specific exchange traded funds falling off as Japan and Europe dip into a bear market.
British equities are joining other European markets like Germany, France and Spain in a bear market after Wednesday’s 3.5% decline in the FTSE 100 Index, reports Cecile Vannucci for Bloomberg.
The ongoing commodities rout in light of China’s slowdown has dragged on the energy and materials sectors, which account for 17% of the FTSE 100 Index.
“We do not see any lasting potential for these sectors to outperform and believe any recovery might be short-lived,” Christian Stocker, equity strategist at UniCredit, told Reuters. “The trend of earnings estimates is declining strongly, relative valuation versus the overall market is still very high and a lasting trend reversal in commodity prices is not in sight. We recommend remaining underweight on commodity stocks.”
The regional Stoxx Europe 600 index dipped into a bear market last week while German, French and Spanish benchmarks were at least 22% off from their highs.
The iShares MSCI United Kingdom ETF’s (NYSEArca: EWU), the largest U.K.-related ETF listed in the U.S., fell 2.9% Wednesday and declined 29.0% since its mid-May 2015 highs.
Additionally, since the Spring 2015 highs, the iShares MSCI Germany ETF (NYSEArca: EWG) decreased 24.5%, iShares MSCI France ETF (NYSEArca: EWQ) dropped 22.2%, iShares MSCI Spain Capped ETF (NYSEArca: EWP) plunged 49.1% and the broader Vanguard FTSE Europe ETF (NYSEArca: VGK) fell 24.3%.
Japanese stocks also retreated into a bear market Wednesday amid the ongoing pressure in Asian equities. The Topix index fell 3.7% to 1,338.97 at the close, trading at a 21% loss since a high on August 10, while the Nikkei 225 Stock Average also sank 3.7% to 16,416.19 and slid 21% off its June 24 peak, Bloomberg reports.
“The frailty in the Chinese growth remain the core problem for investors and the spotlights are not moving away from it anytime soon,” Naeem Aslam, chief market analyst at AvaTrade, said, according to CNBC.
Since the August 10 high, the iShares MSCI Japan ETF (NYSEArca: EWJ) sank 18.3%.
The global selling has also dragged the MSCI All-Country World Index, a measure of major developed and emerging markets, down more than 20% from early last year, CNBC reports.
The iShares MSCI ACWI ETF (NasdaqGM: ACWI), which tries to reflect the performance of the MSCI ACWI Index, was 21.1% lower since its May 2015 high.
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.