The equity market sell off continued on Thursday and Friday, pushing several indicators in the US and Asia into official correction territory.
A correction is defined as a fall of 10% from the most recent cyclical peak, and this was achieved in the US overnight by both the Dow Jones Industrial Average and the S&P 500, which ended Thursday with cumulative losses of 10.36% and 10.16% respectively.
The Nasdaq Composite was not far behind, but remained short of correction territory at the close on Thursday, with cumulative losses since its most recent peak of 9.71%.
Nikkei and Hang Seng
In Asia on Friday, most stock indicators suffered heavy daily losses, but few were propelled into official correction. Among those that were, however, were the biggest: Japan's Nikkei 225, with cumulative losses of 11.31% and Hong Kong's Hang Seng down 11.36%.
While most European markets were also down sharply on Thursday, and opened lower on Friday, they remained short of correction levels, with the EuroStoxx 50 down 8.47% since its most recent peak, and London's FTSE 100 with cumulative losses of 8.37%.
The Vix index, a measure of volatility on the S&P 500 often colloquially called Wall Street's "fear gauge" closed on Thursday at 33.46, up more than 20% on the day. On Tuesday, the Vix spiked up to 50.3 - its highest peak in three years and its biggest one-day rise ever.
Bank of America Merrill Lynch (BAML) data suggested the week had seen record equity outflows of $30.6bn, of which $4bn found its way into bond markets.
Price action on foreign exchanges and bond markets suggested an across the board sell off was not on the cards, said Chris Turner at ING.
He added: "Rather [this looks like] a natural correction after the multi-month gains in stock markets and healthy gains in emerging market currencies."
Others suggested, however, that overzealous speculation on continued low volatility in global stock markets by highly-leveraged investors had exacerbated the sell off.
Earlier this week, an exchange-traded note that shorted volatility - or backed low volatility conditions continuing - was wiped out as investors rushed to withdraw.
JPMorgan and BAML suggested on Thursday that institutional investors adopting similar strategies may have to sell up to $200bn in equities this week.