Oil prices bounced from multi-month lows yesterday but stocks fell as disappointing data heightened worries over slowing global growth, while the pound wavered as Prime Minister Theresa May faced the hard task of selling her Brexit deal.
European shares hit a two-week low after data showed the German economy contracted for the first time since 2015, tracking similar losses in Asia where data in Japan and China underscored worries about weaker growth.
They later pared some losses after Reuters reported that Opec and its partners were discussing a proposal to cut output, helping oil prices reverse opening losses and putting an end to their longest losing streak in decades.
The MSCI’s world equity index remained on track for its fifth day of losses in a row, but reduced its decline to 0.1 per cent by the afternoon session. The pan-European STOXX benchmark index was down 0.2 per cent, while US stock index futures pointed to a flat open.
Sterling fell from the seven-month high versus the euro and eased below $1.30 in volatile trading after being boosted from news that Britain and the European Union agreed on the text of a Brexit divorce deal.
Although sterling softened from peaks hit in the previous session, investors were anticipating wild swings ahead for the British currency. Sterling/dollar implied overnight volatility jumped to 23 per cent, its highest since a general election in June 2017.
Meanwhile, oil attempted to rebound after plunging around 7 per cent the previous session, with surging supply and the spectre of faltering demand scaring off investors.
The growing prospect of Opec and allied producers cutting output at a meeting next month however propped up the market, helping US West Texas Intermediate (WTI) crude futures trade 0.3 per cent at $55.9 a barrel and reverse opening losses.
According to three sources familiar with the issue, Opec and its partners are discussing a proposal to cut oil output by up to 1.4 million barrels per day for 2019, to avert an oversupply that would weaken prices. In the previous session, US crude futures suffered 12 straight sessions of losses.
Brent crude oil futures also bounced, up 0.9 per cent, at $66.05 per barrel. In the previous session they hit an eight-month low following a 25 per cent slide from the four-year high reached early in October.