Equity markets worldwide tumbled yesterday, led by commodity-linked shares as oil prices fell to five-and-a-half-year lows and investors fled to the safety of government bonds.
Crude oil futures and US crude prices dropped to their lowest levels since spring 2009, hit by a global supply glut and lackluster demand. Strength in the US dollar, which touched a near nine-year high against the euro on the EBS platform, weighed on dollar-denominated commodities.
Data showed Russia’s oil output hit a post-Soviet high last year, while Iraq’s oil ministry said that the country’s oil exports in December were the highest since 1980, underscoring excess supply.
Brent crude for February fell to as low as $52.70 per barrel, while US crude dipped below $50 to a low of $49.95 per barrel. It was lately traded at $50.34 a barrel.
The S&P 500 energy sector was last down 4.3 per cent after falling almost 20 per cent over the last two quarters of 2014.
European oil and gas and the basic resources indexes were last down five per cent and 3.8 per cent, respectively.
The decline in US stocks is “driven quite a bit by the slump in energy prices,” said Rick Meckler, president of LibertyView Capital Management in Jersey City, New Jersey.
“You also have a very strong dollar,” he said. “Multinationals will have their earnings decreased if they aren’t fully hedged.”
Political uncertainty in Greece, which has renewed fears of a possible Greek exit from the eurozone, also rattled European stocks before the country’s elections later this month.
The US dollar index, which measures the greenback against a basket of six major currencies, hit a nine-year high of 91.775.
The euro hit a near nine-year low against the dollar of $1.18605 on the EBS platform, tumbling on the worries over Greece.
Weaker oil prices and the stronger dollar weighed on emerging markets shares, which hit more than two-week lows.
Chinese shares were the exception, reaching a five-year closing high. The concerns about Greece and Europe’s economy helped push long-dated US government bond yields to their lowest levels since August 2012. The yield on the 30-year US Treasury bond was last at 2.614 per cent after touching a low of 2.604 per cent.
MSCI’s all-country world index was last down 1.75 per cent at 408.64. Europe’s broad FTSEurofirst 300 index was down 2.27 per cent at 1,332.28.
The Dow Jones industrial average was down 1.42 per cent at 17,579.45. The S&P 500 was down 1.5 per cent, at 2,027.41.
The Nasdaq Composite was down 1.11 per cent, at 4,674.12.
Brent crude was last down $3.50 at $52.92 a barrel. US crude was last down $2.49 at $50.2 per barrel.
The dollar index was up 0.46 per cent, to 91.497. Spot gold prices rose $7.32 to $1,196.20 an ounce.