GLOBAL MARKETS-Bond yields tumble as Netflix fuels stock market sell-off

BY Reuters | TREASURY | 01/21/22 12:00 PM EST

(Adds dateline, byline, fresh prices)

* Stocks drop in Europe, Asia after Wall Street sell-off

* Oil prices fall further away from 7-year highs

* Treasury yields drop as investors seek safety

* Graphic: Global asset performance

* Graphic: World FX rates

By Herbert Lash and Tommy Wilkes

NEW YORK/LONDON, Jan 21 (Reuters) - Risk aversion dominated on Friday as stocks slumped in Europe, Wall Street slipped, oil prices fell and bond prices surged with traders scurrying for the relative safety of government debt.

Investor nerves over how aggressive the Federal Reserve will tighten monetary policy were shaken by poor subscriber growth at Netflix late on Thursday. Its share price tumbled nearly 20% and sent U.S. and other markets lower.

The Nasdaq, the stand out performer of the stock market boom since the pandemic began, has fallen more than 10% from a November all-time high and is poised for its worst week since markets crashed in March 2020.

With expectations the Fed will raise interest rates up to four times this year and also reduce its balance sheet, fear of a hard landing has dramatically increased, Steven Ricchiuto, U.S. chief economist at Mizuho Securities USA LLC, said.

Ricchiuto said this could be overplayed.

"We are very confident the economy will not fall into a recession even though it appears the Fed is embarking on a policy mistake," he said in a note.

U.S. Treasury and euro zone government bond yields fell as concerns about potential conflict in Ukraine also dented risk appetite and stock market drops increased demand for the debt.

The yield on 10-year Treasury notes slid 5.8 basis points to 1.776%, a sharp drop from a two-year high of 1.902% touched on Wednesday.

In Europe, the German, French and Italian indices fell about 2%, with the broad Euro STOXX index of 600 leading regional companies falling 1.97%. MSCI's all-country world index fell 0.48%.

On Wall Street, the Dow Jones Industrial Average fell 0.30%, the S&P 500 slid 0.67% and the Nasdaq Composite dropped 1.06.

Markets in Asia were broadly lower, including in China where benchmark mortgage rates were cut on Thursday in the latest move to prop up an economy soured by its property sector.

But the sharpest drops in recent days have been in U.S. markets, with the benchmark S&P 500 heading toward its worst month since late 2020.

The U.S. dollar edged lower with U.S. Treasury yields, with investors looking to next week's Fed meeting for more clarity on the outlook for rate hikes and quantitative tightening.

The dollar index, which tracks the greenback versus a basket of six currencies, fell 0.17% to 95.595, while the yen slid 0.31% to $113.7400. The euro was last up 0.30 percent, at $1.1344.

Oil prices slid for a second day, pressured by an unexpected rise in U.S. crude and fuel inventories while investors took profits after global oil benchmarks touched seven-year highs.

Brent crude was down $0.58 at $87.8 a barrel. U.S. crude was down $0.48 at $85.07 a barrel.

(Reporting by Herbert Lash, dditional reporting by Sujata Rao in London and Kanupriya Kapoor and Stella Qiu in Singapore; Editing by Raissa Kasolowsky, Kirsten Donovan and Alexander Smith)

In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

Before investing, consider the funds' investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information. Read it carefully.