A man looks at a screen displaying market news inside the Bombay Stock Exchange building in Mumbai, India, on Thursday. Indian shares followed global stock markets down,  falling more than 3%. Picture: REUTERS/DANISH SIDDIQUI
A man looks at a screen displaying market news inside the Bombay Stock Exchange building in Mumbai, India, on Thursday. Picture: REUTERS/DANISH SIDDIQUI

NEW YORK — Global equities teetered on the precipice of a bear market, as US shares staged an afternoon comeback on Thursday to trim losses that surpassed 2% amid growing concern that central banks would not be able to boost growth.

Oil pared loss after falling to the lowest level in 12 years, while bonds rallied.

The Standard & Poor’s 500 Index fell 1.2% at 4pm in New York, as losses that sent Europe’s benchmark to the lowest level since 2013 combined to drop the MSCI All-Country World Index 20% from a record.

Investors ignored a second day of testimony from Janet Yellen, whose signal that the Federal Reserve would not rush to raise rates in the face of market turmoil failed to stem a selloff in risk assets from bank shares to crude oil and emerging-market currencies.

The Russian rouble and rand leddeveloping-nation currencies lower with a gauge of 20 exchange rates slipping 0.2%, reversing earlier gains.

The yen leaped to its highest in more than a year. Major sovereign bond markets rallied, pushing 10-year Treasury yields towards 1.6%. Gold rose beyond $1,200 an ounce.

Signals by central banks from Europe to Japan that additional stimulus is at the ready are failing to ease investor concern that global growth will keep slowing.

Citigroup’s Economic Surprise Index already indicates data in Group of 10 economies are falling short of estimates by the most since April 2013, and a selloff in crude oil and weakening credit markets are exacerbating the malaise.

Ms Yellen suggested that the central bank might delay, but not abandon, planned interest-rate increases in response to recent turmoil in financial markets.

"Central bank policies and the uncertainty around their effectiveness is the big macro concern right now," said Leo Grohowski, chief investment officer of BNY Mellon Wealth Management in New York. "There’s a large disconnect right now between what the Fed might do and what they’re saying and what the market is expecting. There’s a lot of Fed uncertainty back on the table reminiscent of late last summer."

The Nasdaq 100 Index erased a loss of 1.6%, while the S&P 500 cut a loss to less than 1% near 2.45pm, when the broader index dipped to 1,810.10, breaching a level that halted a selloff on January 20.

Crude pared its decline at the same time, as the Wall Street Journal reported oil cartel Opec members may consider co-operating to curb output.

Down by about $3.50 per barrel over the three prior sessions, US benchmark West Texas Intermediate for delivery in March dived another $1.24 (4.5%) to $26.21 a barrel, its lowest close since May 2003. In London, Brent North Sea crude for April, the European oil benchmark, dropped to $30.06 a barrel, down 78c (2.6%) from Wednesday’s settlement.

"We got to about that 1,812 level and coincidentally that Opec headline crossed around the same time. It could be a combination of this headline with the technicals," said Walter Todd, chief investment officer for Greenwood Capital Associates in South Carolina. "That’s a level of prior support that we hit in October 2014. People are searching for support levels going back to prior lows."

The MSCI Emerging Markets Index sank 2.5%, heading for the biggest decline in three weeks, with energy producers leading losses.

As trading resumed in Hong Kong, the Hang Seng Index fell 3.9%, for its worst start to a lunar new year since 1994. The Hang Seng China Enterprises Index of mainland companies slumped 4.9% to its lowest since March 2009. Markets remained closed in mainland China, Taiwan and Vietnam.

Yields on US 10-year Treasuries slipped three basis points to 1.63%. Ms Yellen added fuel to this year’s bond rally by suggesting on Wednesday the central bank may delay raising interest rates.

The Portuguese 10-year bond yield jumped above 4.5% for the first time since March 2014, with the additional yield investors demand for holding the debt instead of benchmark bunds reaching the widest in more than two years.

The 10-year gilt yield fell 13 basis points to 1.28%, after earlier reaching a record low. The yield on German 10-year bunds slid to as little as 0.16%, the least since April, and HSBC said it may drop to as low as 0.05% in the next four months. A gauge of the euro region’s inflation outlook reached the lowest on record.

Gold climbed to the highest in a year, nearing bull-market territory, as investors sought a haven from tumbling stock markets after Ms Yellen suggested the central bank may delay raising interest rates. Producer shares rallied.

Bloomberg