Investing.com - Here are the top five things you need to know in financial markets on Tuesday, February 6:
1. Dow Futures Swing Violently In Battle To Recover From Historic Selloff
U.S. stock index futures pared significant losses ahead of Tuesday's opening bell, but Dow futures still pointed to a negative open as a historic sell-off continued to weigh on sentiment worldwide.
During Monday's late hours, Dow futures were down by as much as 850 points at one point, while S&P 500 futures were lower by around 100 points. But futures made a sharp u-turn in Europe, erasing most of their declines in an extremely volatile overnight trading session. By around 3:45AM ET, Dow futures reversed losses to rise some 100 points, with the Nasdaq and S&P 500 futures also recovering somewhat.
The roller-coaster ride continued, with Dow futures last down around 100 points, or 0.4%, while S&P 500 and Nasdaq futures pointed to modest gains at the open, with both up around 0.2%.
U.S. stocks plunged on Monday, with both the Dow and S&P 500 indices slumping more than 4%, as the Dow notched its biggest intraday decline in history with a nearly 1,600-point drop and Wall Street erased its gains for the year.
While there was no particular piece of news that pushed major U.S. indexes deep into the red on Monday, the recent moves in the bond market have added volatility and concern to the market.
Rising bond yields can crimp demand for assets perceived as riskier, such as stocks, particularly when those yields are higher than those of equities.
2. Global Stock Market Rout Spreads to Asia, Europe
Stock markets across Asia and Europe nosedived after the steepest fall on Wall Street in six years shattered years of calm.
Asian equities were covered in a sea of red, with Japan's Nikkei tumbling 4.7%, or 1,071 points, its largest such decline since the U.K.’s vote to leave the European Union in June 2016. Benchmarks in China, Hong Kong and Taiwan all suffered declines of 3%-to-5%.
Meanwhile, in Europe, the continent's bourses suffered a sharp selloff at the open, with most indices down about 3%, as weakness seen in markets overseas weighed on sentiment. Autos, banks and insurance stocks were the most impacted by the sell-off, down by about 2%.
3. VIX Volatility Index Soars To Highest Since August 2015
The CBOE Volatility Index reached its highest level since August 2015, crossing above the 40-level as U.S. stocks continued their wild ride.
Since 1990, the index’s average has been 19.3, but during the past three years of market calm that figure’s been below 13.
Amid the quick pace of moves, the VelocityShares Daily Inverse VIX Short Term exchange-traded note (NASDAQ:XIV) - a security issued by Credit Suisse (SIX:CSGN) - fell more than 80% in extended trading on Monday. The move after hours sparked fear among traders that violent declines in exchange-traded notes like this one would cause market volatility measures to spike further and weigh on the broader market.
Credit Suisse said in a statement that ''the XIV ETN activity is reflective of today's market volatility. There is no material impact to Credit Suisse." Nonetheless, the stock was one of the worst-performing banks in mid-morning trade, down by more than 4%.
4. Bitcoin Continues To Tumble, Briefly Breaking Below $6,000
Bitcoin prices were on the backfoot yet again, briefly breaking below the $6,000-level, as a selloff sparked by fears over tighter regulation of cryptocurrencies deepened.
Bitcoin was last down around 16% at $6,535 on the Bitfinex exchange, after falling as low as $5,947 earlier, the weakest level since mid-November. With that decline, Bitcoin has now lost roughly 60% for the year so far.
Ethereum, the world’s second largest cryptocurrency by market cap, was down 20% at $636.80.
Meanwhile, Ripple's XRP token was trading at $0.63001, also down around 20% for the day.
Bitcoin and rival cryptocurrencies have been hit by a range of factors, including fears over tighter regulation and ongoing concerns over digital currency tether and its ability to collapse the bitcoin market.
Cryptocurrency regulation looked likely to remain in focus on Tuesday as lawmakers in the U.S. Senate prepared to question the heads of the Commodity Futures Trading Commission and the Securities and Exchange Commission over how to better regulate the virtual currency market.
5. Dollar, Bond Yields Snap Back
The U.S. dollar slipped along with government bond yields, after earlier gaining when investors had dumped riskier assets for the relative safety of the greenback and bonds, but currency and debt markets were generally calm compared with the rout in equity markets.
The dollar index, which gauges the U.S. currency against a basket of six major rivals, was a shade lower at 89.40. The sell-off across world stock markets sent investors rushing into the dollar on Monday, helping the U.S. currency perform well against the euro, British pound and commodity-linked currencies.
Meanwhile, the U.S. 10-year Treasury yield slid about eight basis points to 2.719%, down from a four-year high of 2.885% set on Monday, as investor risk aversion triggered a drop in yields.