LONDON - Financial markets turned lower once again on Tuesday after a 5.4 percent slide in Japan's main stock index and the interest rate on the country's benchmark bond dropped into negative territory for the first time ever.
Stock markets have endured a torrid start to the year as investors have fretted over a number of issues, including the fall in the price of oil to multi-year lows, a slowdown in China and whether many parts of the global economy will fall into recession and suffer a debilitating period of deflation, or falling prices.
Global equities have now lost about $6 trillion since the start of the year. In January, that was largely due to worries over the slowdown in China and the slump in the price of oil.
"Now, some commentators are concerned that another banking crisis might be brewing," said Neil MacKinnon, global macro strategist at VTB Capital.
On Tuesday, Japan's Nikkei index led the way lower, ending the day down 5.4 percent at 16,085.44. That fed through into the European session and the expected open on Wall Street.
In Europe, stocks managed to eke out gains on the open before succumbing to another bout of selling. The FTSE 100 index of leading British shares was down 0.8 percent at 5,642 while Germany's DAX fell 1.6 percent to 3,978. The CAC-40 in France was 2.1 percent lower at 3,981.
Wall Street was headed for a lower opening too, with Dow futures and the broader S&P 500 futures down 0.8 percent.
Perhaps more remarkable than the stock market reverses was the news that the interest rate on the country's benchmark 10-year bond became negative for the first time ever.
The yield on the country's 10-year bond fell 0.05 percentage point to minus 0.03 percent. That means investors are willing to pay for the right to lend money to Japan over that time period. One reason they might do so is because Japanese bonds are considered safe. By contrast, the equivalent bond rate for the U.S. is 1.75 percent, also very low in historical terms.
The yields on Japan's bonds have been low for years as the country kept its interest rates at or near zero. Last week, the Bank of Japan cut one of its key rates into negative territory and that's pushed down the yields payable on its bonds.
One major reason why the Nikkei sank so much Tuesday was the fact that the Japanese yen has strengthened because of its supposed safe haven status.
That's likely to worry economic policymakers in the country who hope a lower yen will help economic activity and lift inflation. A lower yen makes Japanese exports more competitive in international markets as well as raising the cost of imported goods.
On Tuesday, the dollar was down 0.2 percent at 115.35 yen. As recently as the end of January, the dollar was trading above 121 yen.
One sign the global economy is not as healthy as many had hoped has been the collapse in the price of oil.
According to the International Energy Agency, oil prices will continue to come under pressure as supply is set to outpace demand this year.
The organization, which advises countries on energy policy, said in its monthly report that global excess supply may reach 2 million barrels per day during the first quarter, and a further 1.5 million barrels a day in the second quarter.
"If these numbers prove to be accurate, and with the market already awash in oil, it is very hard to see how oil prices can rise significantly in the short term," the IEA said.
After heavy losses Monday, the U.S. benchmark for crude was up 50 cents at $30.19 a barrel. Brent crude, the international standard, was up 26 cents at $33.14 a barrel.