Oil prices slumped to five-year lows yesterday and US and European equity markets fell as investors worried about the Greek and Chinese economies withdrew from riskier positions and bought Japanese yen, which rose against the US dollar.
Brent crude oil futures fell to $64.04 a barrel, the lowest since September 2009, before recovering a bit as producers forecast lower demand for oil next year. US and European markets were dragged lower by losses in energy, as the S&P energy index was last off more than three per cent as the worst performing sector.
Oil prices have been under pressure from the dollar's strength and Opec's decision against an output cut, with Brent down more than 40 per cent from its June high. Brent crude was last down $2.76, or 4.13 per cent, at $64.08 a barrel. US crude was last down $2.83, or 4.43 per cent, at $60.99 per barrel.
“Crude oil is under punishment today once again on the back of the Opec news. Opec has cut its demand forecast for next year and this has unbalanced the demand and supply equation further and traders are not liking the sound of this at all,” said Naeem Aslam, chief market analyst at AvaTrade.
The drag on European energy shares sent the region's broad FTSEurofirst 300 index into negative territory for a third straight session. Chinese shares rebounded after data showed inflation in the world's second-biggest economy hit a five-year low last month, kindling hopes for more monetary policy easing. The losses in US and European shares overshadowed the gains, however.
In Europe, Greek shares were among the top losers on mounting concerns over the country's politics, down one per cent, adding to Tuesday's roughly 13 per cent plunge.
The worries over Greece and the weakness in Chinese economic data sent the US dollar lower for a third straight session. The greenback was on track to post its biggest three-day loss against the yen in over a year, though analysts still believe the dollar will continue to improve in coming months.
The dollar was last down nearly one per cent against the yen at 118.57 yen. The yen is viewed as a safe-haven currency during times when investors are more risk-averse or economic fundamentals are uncertain.
US government bond yields, which move inversely to prices, were little changed after the US Treasury's auction of $21 billion in reopened 10-year notes, while German government debt fell to record lows after concerns over Greece fueled safety bids.