By Herbert Lash
NEW YORK (Reuters) - Global equity markets fell on Monday as civil unrest in Hong Kong weighed on investor sentiment, while Treasury debt prices rose over uncertainty sparked by the protests.
Stocks on Wall Street opened sharply lower following declines in Europe and Asia as Hong Kong democracy protesters defied volleys of tear gas and police baton charges in one of the biggest political challenges for China since the Tiananmen Square crackdown 25 years ago.
Shares of companies exposed to Hong Kong fell, including HSBC
Losses on Wall Street were initially broad, with all 10 of the S&P 500's sectors lower as equity investors shrugged off the latest data showing strong U.S. economic growth. Stocks subsequently came off their lows, and utilities, seen as a defensive play, rebounded.
The sell-off was overdone and was exacerbated in the absence of any news of consequence to the market, said Donald Selkin, chief market strategist at National Securities in New York.
"The problem is we're not going to get any upside motivations here until the start of third-quarter earnings seasons next week," said Selkin, adding Friday's jobs report will be the next major event investors are watching for.
When the CBOE Volatility Index <.VIX> rose above 17, or close to resistance points in April and early August, the market's decline receded, Selkin said.
The VIX was last up 7.1 percent at 15.90, and Wall Street pared losses of almost 1 percent soon after the open.
The Dow Jones industrial average <.DJI> fell 68.39 points, or 0.4 percent, to 17,044.76. The S&P 500 <.SPX> slid 7.3 points, or 0.37 percent, to 1,975.55 and the Nasdaq Composite <.IXIC> lost 9.35 points, or 0.21 percent, to 4,502.85.
MSCI's all-country world index <.MIWD00000PUS> was down 0.5 percent, while the FTSEurofirst 300 index <.FTEU3> of leading European shares closed down 0.43 percent at 1,371.11.
Benchmark 10-year U.S. Treasury notes
Uncertainty around the protest in Hong Kong was seen as one driver of demand for bonds. Month-end buying also added to demand, while some gains were also seen as giving back weakness from Friday over fears that bond behemoth Pimco would have to sell assets after the departure of co-founder Bill Gross.
Volatility in rates also spiked on Friday over concerns that Pimco would unwind large positions that bet on low volatility.
"The idea was that Pimco has sold a lot of vol and they may get out of some of those positions," said Ira Jersey, an interest rate strategist at Credit Suisse in New York.
U.S. consumer spending accelerated in August, while contracts to purchase previously owned homes fell more than expected last month but were still at the second-highest level of the year. Investors are keen to see Friday's much-anticipated jobs report for September for further signs on the economy.
The dollar erased early gains against the yen on nervousness the democracy protests in Hong Kong might hurt the local economy and the city's status as a global financial hub.
During bouts of political tension, investors often seek the safe haven of the Japanese currency.
The greenback gained 0.07 percent to 109.35 yen
U.S. crude oil hovered around $94 a barrel, carrying over strength from a strong report on U.S. gross domestic product last week, while Brent edged up after nearing a two-year low last week.
Brent for November delivery
(Additional reporting by Marius Zaharia in London, Reporting by Herbert Lash; Editing by Chris Reese)
