US stock markets remain volatile following steep losses

Some experts are suggesting the "correction was exactly what the market needed"

US stock markets remain volatile following steep losses

Picture by: Manuel Cohen/Zuma Press/PA Images

US stock markets remain volatile following a violent 'correction' in values that has hit financial markets across the world.

After the Dow Jones Industrial Average suffered its biggest one day points loss in its 122-year history on Monday, stocks in Asia and Europe took further hits on Tuesday.

Share price falls this month have been linked to market fears that stocks are over-valued - equities having been the main source for investor cash since the financial crisis at a time of record low borrowing costs.

But a key US jobs report on Friday, showing better-than-expected wage data, spooked sentiment because it raised the prospect of the US central bank raising interest rates at a faster pace to cool inflation.

It heralded the start of a correction rather than a crash, experts said, with investors betting on low market volatility getting their fingers burned as the so-called Vix measure of volatility hit levels not seen since 2011.

US stock markets dived by 2% on opening on Tuesday but entered positive territory just minutes later.

The Dow Jones, S&P 500 and Nasdaq have been seeing swings between gains and losses ever since. Dow swings were of up to 1,000 points.

Neil Wilson, senior markets analyst at ETX Capital, said of opening on Wall Street: "The valuations were certainly looking attractive on a forward earnings basis, providing attract entry points for a number of stocks.

"Some deep-pocketed funds may have stepped in to hoover up what they could - in this context it looks for the time being like the correction was exactly what the market needed - although we have a long way to go today still and sentiment is still fragile after two bruising sessions.

"Meanwhile, as picked up elsewhere, there was a bit of a brutal unwinding of the short volatility trade that may be just about done."

In London, the FTSE 100 opened 3.5% lower but recovered some of those losses by the close but still ended the day 2.6% - or 193 points - down at 7141.

The ISEQ also saw a volatile day, and was down 0.97% by late afternoon.