World stocks ended three days of gains yesterday as lacklustre global economic data led to another slump in oil prices.
Oil fell five per cent after dropping as much as seven per cent the previous session, and the glum macro mood left Wall Street set for 0.9 to 1.1 per cent declines after losses in both Europe and Asia. Oil fell after BP announced its biggest loss in 20 years and plans to cut thousands of jobs, Exxon Mobil reported its profits plummeted and S&P cut the ratings of Shell and BHP Billiton.
Stocks fell 1.2 to two per cent in London, Frankfurt and Paris as oil and gas shares dropped.
Banks and Swiss stocks also took a bashing. UBS slumped eight per cent after results showed its wealthy customers were pulling out their money in droves.
In the currency markets, waning risk appetite nudged Japan’s yen and the euro higher against the dollar, although another safe haven, the Swiss franc, dropped as its central bank said it would intervene to weaken the franc if necessary.
Sterling reached a three-week high as European Council president Donald Tusk presented proposals for keeping Britain in the EU.
UK Prime Minister David Cameron said the plans showed “real progress” although there was “more work to do”.
The lure of relative safety saw gains for benchmark US and European government bonds. Eurozone yields got an extra kick lower from European Central Bank president Mario Draghi’s reiteration on Monday that the ECB may cut rates again next month.
Oil still dominated the moves, though. Brent and US crude fell $32.98 and $30.65 a barrel respectively, having lost as much as seven per cent overnight.
Oil fell amid weak economic data from China, Europe and the US and doubts that oil-producing countries will cut output in the face of a global supply glut. Oil production in Russia rose to a post-Soviet high in January, the latest data from its energy ministry showed.
“It’s hard to see a successful agreement between Opec and Russia to cut production, and people are starting to see that,” said Andy Sommer, senior energy analyst at Axpo Trading in Dietikon, Switzerland.
In the US, oil giant Exxon Mobil was the top draw after BP’s woes. It is the world’s largest publicly traded oil company, and said it would slash capital spending by a quarter after its profit halved in the fourth quarter.
Markets appeared little fazed by the results of Iowa’s caucus for the US presidential nomination. Among Republicans, US Senator Ted Cruz beat Donald Trump. For the Democrats, former Secretary of State Hillary Clinton was in a virtual tie with rival Bernie Sanders.
The dollar climbed as much as one per cent the rouble, the rand, Mexico’s peso and Malaysia’s ringgit. Emerging market stocks fell 1.5 per cent after four days of gains.
Overnight, MSCI’s broadest index of Asia-Pacific shares outside Japan had lost 1.2 per cent. Stocks fell almost everywhere except China, which saw a two per cent bounce.