A renewed drop in oil prices due to worries about a global supply glut yesterday hurt US and European stock markets and weighed on the dollar following a rebound in those sectors late last week.
Anxiety about the drag from tumbling energy prices on global economic growth and central bank policies revived safe-haven demand for the yen, gold and US government debt.
Crude oil prices fell four per cent as Iraq announced record-high oil production feeding into a heavily oversupplied market, wiping out much of the gains made in one of the biggest-ever daily rallies last Friday.
“The news that Iraq has probably hit another record builds on the oversupply sentiment,” said Hans van Cleef, senior energy economist at ABN Amro in Amsterdam.
The oil-led market turbulence since the start of 2016 has raised hopes of more aid from major central banks.
Last week, European Central Bank chief Mario Draghi signalled the bank was open to more monetary stimulus to combat weak growth and inflation in the eurozone.
Traders have bet the Federal Reserve would seek to soothe financial markets after its two-day meeting on US monetary policy that will begin today.
Global markets slumped at the start of the year on fears that a slowdown in China would spread to the rest of the world economy, and oil prices sank to 13-year lows.
German business confidence deteriorated to an 11-month low in January, a survey showed, suggesting growing concern among company executives in Europe’s largest economy.
The Dow Jones industrial average was down 83.34 points, or 0.52 per cent, at 16,010.17.
The S&P 500 was 12.71 points, or 0.67 per cent, lower at 1,894.19.
The Nasdaq Composite was down 25.75 points, or 0.56 per cent, to 4,565.43.
The pan-European FTSEurofirst 300 index provisionally closed down 0.7 per cent, while Tokyo’s Nikkei ended 0.9 per cent higher.
The MSCI world equity index, which tracks shares in 45 nations, fell 1.3 points or 0.35 per cent, to 366.67.
Losses in oil and Wall Street pushed the greenback lower.
The dollar index, which tracks the greenback versus a basket of six currencies, slipped 0.1 per cent, to 99.445.
The yen edged up 0.2 per cent against the dollar at 118.53 yen, and was steady against the euro at 128.32 yen.
Brent crude oil futures fell four per cent to $30.89 a barrel while US crude slumped 4.7 per cent to $30.67.
Iraq’s Oil Ministry told Reuters yesterday that oil output reached a record high in December, putting oil prices under renewed pressure.
US 10-year Treasury yields were down three basispoints at 2.02 per cent, as the fall in oil prices underpinned support for safe-haven debt.
Spot gold rose 0.85 per cent to $1,107.19 an ounce.