Stock markets fall 0.5% in minutes, leaving traders perplexed

LONDON, May 4 (Reuters) - U.S. and European stock markets saw a sudden 0.5% drop in hefty volumes around 1130 GMT on Tuesday, leaving traders scratching their heads and one calling it a “micro flash crash”.

Nasdaq stock futures fell 0.5% in four minutes while the S&P 500 e-mini futures fell 0.4%, but later recouped some of those losses. Europe’s benchmark STOXX 600 index turned negative and traded 0.6% lower as of 1211 GMT.

“Not a great deal of movement in other assets but equity futures hit an air pocket,” said an equity sales trader based in London.

“Looking at the price action and volume, a sense the machines took over for a second and resulted in a micro flash-crash.”

The volatility appeared to boost demand for safe-haven bonds. The 10-year U.S. Treasury yields dropped almost 2 basis points to 1.591% before creeping back above 1.6%. (Reporting by Thyagaraju Adinarayan; Editing by Dhara Ranasinghe)