The Nikkei 225 and Dow Jones Industrials both broke through key support at their 200 day moving averages last night, trailing the FTSE 100 index which broke below the line at the end of last week.
In the case of the DJI that is the first occasion that the index has broken below the level since the end of 2012, while the Nikkei has not broken below since the launch of Abenomics 15 months ago.
‘There could be another leg down in equity markets before a meaningful price low is reached,’ said Raymond James chief strategist Jeffrey Saut.
‘Given the oversold readings, we could be in for further rally attempts this week, but the weight of the evidence continues to suggest caution.’
It was a torrid day for global equity markets yesterday as global indices dipped to four month lows left the Euro Stoxx 50 as the only one of the major developed regions above its 200-day average.
Japanese markets are now down 6.07% over the year-to-date, followed by US markets on -5.67% and the UK off -4.09%
The fresh wave of selling followed softer than expected US manufacturing data released on Monday, with the ISM activity index slipping to a June low, and the Chinese PMI which fell to 49.6.
Critically unlike the previous big global sell off in the second quarter of 2012 Treasuries have strengthened, with yields on the 10yr benchmark down almost 10% over the year-to-date.