US markets opened weaker and European shares fell for a seventh day, hours after a scorching trading day for Asian stocks led by a more than 5 per cent fall in Tokyo shares.
The damp sentiment could spill into Singapore bourses today as investors play catch-up after a long holiday weekend due to the Chinese New Year celebrations.
"We will see volatility in the coming days as all kinds of permutations contribute to the market mood," economist Song Seng Wun with CIMB Bank told The Straits Times. Investors will have to deal with low oil prices, political uncertainties, the China slowdown and worries over growth, he said.
Yesterday's rout started in Tokyo as markets plunged, led by bank and brokerage shares. The Topix index sank 5.5 per cent, while the Nikkei 225 Stock Average lost 5.4 per cent. The yen touched 114.21 per US dollar, its strongest level since November 2014. It was trading at 115.07 as of 7.01am in New York (8.01pm Singapore time).
Australia's S&P/ASX 200 index dropped 2.9 per cent, while New Zealand's benchmark S&P/NZX 50 index dipped 1.3 per cent.
Markets from China to South Korea remained closed for Chinese New Year holidays.
European stocks opened weaker, with the Europe 600 Index losing 0.9 per cent at 11.57am in London (7.57pm Singapore time), slipping into so-called "oversold" territory.
A gauge of banks slid to a 28-month low. Deutsche Bank reversed gains to fall 1.5 per cent even as it reassured investors that it has enough cash to pay its debts.
"Investors who probably thought they had hit bottom (on Monday) have been crushed," Mr Nobuyuki Fujimoto, analyst at SBI Securities, told Bloomberg. "All we hear is bad news. Investors must have their heads in their hands right now."
Wall Street opened lower, too. The Dow Jones Industrial Average was down 0.45 per cent, the S&P 500, 0.74 per cent and the Nasdaq Composite Index, 1.34 per cent.
In a note to clients yesterday, Citi analysts said the fear is no longer just about oil collapse and hard landing in emerging markets.
Others backed the assessment.
"It has always been about the global economic slowdown. Oil prices and China data are just excuses to sell down equity," Mr Roger Tan, chief executive of Voyage Research, told The Straits Times.
He added that while local markets make the occasional bull run amid signs of fiscal and monetary stimulus policies, new growth engines will be hard to find. "Slow and painful with occasional 'rain of hope' is going to be Singapore's outlook for the year," he said.