The relentless slide in oil prices pressured energy stocks and currencies exposed to crude exports yesterday, while dousing the appetite for riskier assets and encouraging investors to seek safety in core government bonds.
Major European equity indexes, some of which posted their biggest weekly losses in three years, fell more than two per cent. Stocks on Wall Street, except for Nasdaq, fell more than 1 per cent before paring some losses.
In Europe, the sell-off gathered pace in late trading.
“This is a bloodbath. After such a negative week, there’s not even a rebound into the close. The fact that oil can’t find a floor is spooking market players,” Saxo Bank trader Pierre Martin said in Paris.
The price of Brent crude plumbed lows last seen in July 2009, with the global oil benchmark slipping below $62 a barrel on concerns over a worldwide supply glut and weak demand.
Brent is down 11 per cent for the week, pushing its slump from a June peak above $115 to almost 47 per cent. Brent was last at $62.23 a barrel, down $1.45, while US crude was off $1.65 at $58.30, its weakest since May 2009.
The plunge in oil prices battered currencies strongly linked to crude exports, with Norway’s crown falling to an 11-year low against the US dollar and the Russian ruble hitting another record low. The Canadian dollar slumped to a five-and-a-half-year trough against the greenback.
Sovereign debt yields fell on growing concerns about disinflation as slowing European growth pushed the yield of German and UK government debt to record lows.
Bets increased that the European Central Bank will be forced to resort to further stimulus early next year.
German 10-year yields, the eurozone benchmark, dipped to a record low of 0.619 per cent.
The yield on 10-year US Treasuries fell to 2.0904 per cent.
US stocks dipped, putting the benchmark S&P 500 on track to snap seven weeks of gains. Weak oil prices have increased worries about global demand and raised concerns about earnings for energy companies, with year-end tax selling adding pressure.
The Dow Jones industrial average was down 194.36 points, or 1.10 per cent, at 17,401.98.
The Standard & Poor’s 500 Index was down 16.17 points, or 0.79 per cent, at 2,019.16.
The Nasdaq Composite Index was down 21.24 points, or 0.45 per cent, at 4,686.93.
The S&P energy sector was down 1.0 per cent and has shed more than 16 per cent this year, making it the worst- performing of the 10 major S&P sectors.
MSCI’s all-country world equity index fell 0.87 per cent to 410.74, while the FTSEurofirst 300 index of top European shares closed down 2.6 per cent at 1,321.73 in its biggest weekly loss - at 5.9 per cent – since August 2011.
Britain’s FTSE share index lost 2.5 per cent to post its biggest weekly loss in more than three years.