World stock sell-off deepens; U.S. market expected to drop

The global sell-off in stock markets deepened Thursday amid broad concerns over the health of the world economy.

European stocks were hit particularly hard on doubts over the financial stability of Greece. The German DAX stock index was down 1.5 percent by midday in Europe. France’s CAC 40 shed 2.1 percent and Britain’s FTSE 100 lost 1.6 percent.

Markets in economically weaker European countries fared worse — Spain’s was down 3.5 percent and Italy’s 3 percent.

Wall Street was expected to drop on the open, with Dow and S&P 500 futures down 0.8 percent and 0.9 percent, respectively. Asian markets closed lower earlier, with Tokyo’s Nikkei 225 diving 2.2 percent.

Investors are worried about a downturn in global growth and inflation. Slowdowns in Europe and China are seen threatening the U.S. recovery. U.S. Treasury yields have dropped sharply on expectations that the world’s economic sluggishness could force the Federal Reserve to delay interest rate increases.

That comes on top of other issues facing the global economy — conflict in the Middle East, sanctions between Russia and the West, and the growing threat of the Ebola epidemic in West Africa.

“Absolutely everything is being seen as a reason to sell,” said Craig Erlam, analyst with Alpari in London, who nevertheless expects the sell-off to remain contained.

In Europe, the biggest concern was Greece, where investors are worried the country might need more financial support as its government borrowing rates have risen sharply in recent days. The country’s benchmark 10-year bond yield was up a stunning 1.09 percentage points on the day Thursday, to 8.82 percent. The rate was around 6.5 percent just earlier this week.

The rise suggests Greece is unlikely to be able to wean itself off its bailout loans as hoped, because borrowing on bond markets independently would be too expensive.

A slump in energy prices has also shaken many global investors. The benchmark U.S. crude oil contract was down another $1.25 at $80.53 a barrel in electronic trading on the New York Mercantile Exchange.

Though lower oil prices can help consumer spending, they can weigh on inflation. Low inflation is a problem for many developed economies, particularly in Europe.