Friday 21 October 2016

Oil prices tumble 4pc, European markets fall

Published 25/01/2016 | 07:31

Oil prices fell by 24pc in the fourth quarter. Photo: Reuters
Oil prices fell by 24pc in the fourth quarter. Photo: Reuters

.European stock markets fell on Monday as oil prices reversed earlier gains to tumble 4 percent, while weak business sentiment numbers from Germany highlighted growing concerns about the outlook for the global economy.

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The pan-European FTSEurofirst 300 index .FTEU3, which rose 3 percent on Friday to mark its first weekly gain for 2016, fell 0.8 percent in early trade.

Crude oil prices tumbled 4 percent on persistent worries about oversupply and profit-taking, reversing early gains. That followed a 10 percent surge on Friday on short-covering and fuel demand triggered by freezing weather in parts of the northern hemisphere. [O/R]

Still, with oil prices holding above $30 a barrel, world stock markets remained above multi-year lows hit last week.

Risk aversion amid fears of a China-led global economic slowdown and oil prices sinking to 13-year lows have rocked global markets this month.

German business morale fell to an 11-month low in January, a survey showed, suggesting growing concern among company executives in Europe's largest economy as emerging markets slow and financial markets get off to a jittery start in 2016.

The Ifo survey reading of 107.3 compared with 108.6 in December and was well below 108.4 forecast in a Reuters poll.

Market turbulence sets the backdrop for a meeting of the U.S. Federal Reserve on Tuesday and Wednesday, while Bank of Japan policymakers gather on Jan. 28-29.

Last week, the European Central Bank signalled it could deliver further monetary stimulus, raising hopes that other central banks might take the same path.

The market rout meanwhile could throw the Fed off its course of gradual interest rate hikes.

"Attention will now turn to the U.S. Federal Reserve and the Bank of Japan's latest policy decisions later this week, with the main focus on the U.S. central bank in the wake of last month's historic decision to raise rates for the first time in nine years," said Michael Hewson, chief market analyst at CMC Markets.

The dip in European equity markets contrasted with Asian stocks .MIAPJ0000PUS, which rose 1.5 percent and moved further away from last week's four-year low as oil prices rallied during the Asian session.

Shanghai stocks .SSEC added 1 percent and Tokyo's Nikkei .N225, which slumped to a one-year low last week, rose 1.2 percent.


The dollar slipped 0.4 percent to 118.31 yen JPY=, moving away from a two-week high touched on Friday at 118.88. The euro firmed 0.3 percent to $1.0825 EUR=, after losing 0.8 percent on Friday.

The Australian dollar, sensitive to the ebb and flow in risk appetite and fluctuations in commodity prices, fell 0.4 percent to $0.6975 AUD=D4 after touching a nine-day high of $0.7046 on Friday.

Oil prices meanwhile succumbed to profit-taking after huge gains on Friday.

Brent LCOc1 fell more than $1 to $30.78 a barrel by 0850 GMT. U.S. crude CLc1 declined $1.45 cents to $30.95 a barrel.

"People are taking profits after a huge increase ... The other factor would come from still having the market being in a bearish situation where the market is oversupplied," said Daniel Ang, an investment analyst at Phillip Futures.

Elsewhere, Greek two-year government bond yields fell 9 basis points to 13.48 percent GR2YT=TWEB and the stock market rose 1.3 percent .ATG after Standard & Poor's raised Greece's rating to B- from CCC+ on Friday.

S&P said Greece is broadly in compliance with the terms of its 86 billion euro financial support program after recapitalising its banks and taking budgetary steps.


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