World equities descended into a bear market, as an afternoon comeback in U.S. shares failed to erase losses that sent the Standard & Poor’s 500 Index to its lowest level since 2014. Oil pared declines after sliding to a 12-year low, while the yen climbed.

The S&P 500 ended Thursday down 1.2 percent as declines that sent Europe’s benchmark to its lowest point since 2013 combined to send the MSCI All-Country World Index down 20 percent from a record reached in May, the common definition of a bear market. Japan’s currency capped a fourth rising day, trading at its strongest level since November 2014, while 10-year Treasury yields dropped to 1.66 percent. U.S. crude clawed back some gains in electronic trading after settling down 4.5 percent at its lowest level since 2003.

Investors ignored a second day of testimony from Janet Yellen, whose indication that the Federal Reserve won’t rush to raise benchmark interest rates in the face of global market turmoil failed to stem a selloff in risk assets from bank shares to crude oil and emerging-market currencies.

Central banks from Europe to Japan signaling that additional stimulus is at the ready is failing to ease investor concern over global growth. Citigroup’s Economic Surprise Index already indicates data in Group of 10 economies are falling short of estimates by the most since 2013, and the selloff in crude oil and weakening credit markets are exacerbating the malaise. Yellen suggested that the Fed might delay, but not abandon, planned interest-rate increases in response to recent turmoil in financial markets.

“Central bank policies and the uncertainty around their effectiveness is the big macro concern right now,” said Leo Grohowski, who helps manage more than $184 billion in client assets as chief investment officer of BNY Mellon Wealth Management in New York. “There’s a large disconnect right now between what the Fed might do and what they’re saying and what the market is expecting. There’s a lot of Fed uncertainty back on the table reminiscent of late last summer.”

David Fuller's view

I think the video recording accompanying this article is particularly good, not least this quote:

“Markets panic first and think later.”

My main discussion of stock markets is in the Audio.