U.S. and European options gauges climbed after Morgan Stanley cut its forecast for global growth, concern grew that European banks lack sufficient capital and hopes for more stimulus from the Federal Reserve receded.
The VIX, as the Chicago Board Options Exchange Volatility Index is known, advanced 25 percent to 39.41 at 9:59 a.m. in New York. The VStoxx Index, which measures the cost of protecting against a decline in the Euro Stoxx 50 Index, snapped a five-day losing streak. It climbed 31 percent, the most intraday since Aug. 9, to 45.94. Volatility gauges in Hong Kong, South Korea, Japan and India also rose.
Stocks plunged around the world, led by financial companies, after Lars Frisell, the chief economist at Sweden’s financial regulator, said it won’t take much for interbank lending to freeze. Also, the Wall Street Journal reported that U.S. regulators are scrutinizing the American operations of Europe’s largest lenders to assess their vulnerability. Morgan Stanley cut its forecast for global growth this year to 3.9 percent from 4.2 percent.
“You can see people getting out of the market, and there’s a lot of hedging going on,” Dan Deming, a VIX options trader at Stutland Equities LLC, said in a telephone interview from the CBOE floor in Chicago. “There’s continued concern about European banks and that we might be in for a credit squeeze.”
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