The message from this week’s sell off in global stock markets could not be clearer: The summer time rally, fueled by optimism over central bank stimulus measures, is now over and it’s time to brace for a period of renewed volatility and uncertainty, analysts say.
The S&P 500 index [.SPX 1438.81 5.49 (+0.38%) ] on Tuesday suffered its worst day in three months, while Asian stocks slumped on Wednesday, with Japan’s benchmark Nikkei stock index [.N225 8949.87 43.17 (+0.48%) ]down 1.7 percent in early trade. The sharp sell-off and renewed concerns about Spain’s economy are likely to set the tone for European markets on Wednesday.
A retreat in global markets, which have seen stellar gains over the last three months, reflects a shift in sentiment among investors, analysts say. They add that now the world’s major central banks have unveiled steps to help their economies, focus has returned to the economic outlook, which remains weak in much of the world.
That means markets are expected to remain volatile heading into the final quarter of the year, with further selling in equities likely unless solid signs of an economic recovery emerge.