The global stock market reversal resumed on Thursday as a number of global equity indices edged closer to correction territory - a fall of 10% from the most recent peak.
High trading volumes continued as investors increasingly sold down their exposure to volatile stock markets.
While US markets reversed early gains to finish lower overnight, the losses were mild with the S&P 500 ending just 0.5% lower. However, its cumulative losses since its most recent cyclical peak extended to 6.65% on Wednesday and futures markets indicated opening losses on Thursday.
In Europe, early gains were reversed to push the EuroStoxx 50 index 0.97% lower, while London's FTSE 100 shed 0.58% and Frankfurt's Xetra Dax shed 1.1%.
Asian stocks got away with mixed results on Thursday: most notably the Nikkei 225, which is among the closest to entering correction territory, managed a 1.13% gain.
Not quite a correction
Here's how some of the major global indices now stand regarding cumulative losses after more than a week of market turbulence:
- EuroStoxx 50 down 6.75%
- FTSE 100 down 6.96%
- S&P 500 is down 6.65%
- Nikkei is down 9.25%
- Shanghai is down 8.32%
- Dax is down 8.11%
As can be seen, among the major indices, the Nikkei, with cumulative losses of 9.25% was the closest to entering official correction territory.
Hussein Sayed, market strategist at FXTM, said: "Deciding to buy, sell, or hold is a tough one in such circumstances, but if investors believe the global economy and corporates will continue firing on all cylinders, the downside risk is likely to be limited from current levels. However, another 5-10% correction should not be ruled out."
The Vix index - Wall Street's so-called "fear gauge" edged lower overnight to reflect calmer conditions. On Tuesday, the measure of market volatility recorded its biggest single day spike ever, jumping to 50. On Thursday, it was trading back at the 30 level.
Many have suggested fears over rising inflation and its likely impact on monetary policy provided the catalyst for the market reversal.
But a correction has been a long time coming. Markets kept rising despite warnings of lofty stock valuations. The S&P 500 had been trading at an average forward price to earnings ratio of 20 at the beginning of the year. It has since dropped to a more reasonable 18.
Sayed warned, however, that even at this level prices were still expensive when compared to historic averages.