Oil’s protracted price woes, coupled with pessimism on Germany, caused renewed jitters on world stock markets yesterday, with equities in Europe ending down after Asia had earlier gained ground.
Asian stock markets closed with gains as investors bet on central bank stimulus measures to support markets after the bloodbath at the start of the year.
But it was a different story in Europe and on Wall Street, where shares fell back overall as long-battered oil left behind a two-day streak of gains on excess supply worries.
Facing claims of a worsening economic outlook, Frankfurt’s DAX 30 index ended the session down 0.3%, banks leading the losers.
Dampening sentiment was data which revealed the outlook for the German economy clouded over significantly in January as business confidence fell to its lowest level in 11 months.
The Ifo institute’s closely-watched business climate index fell by a steeper-than-expected 1.3 points to 107.3 points in January, the lowest level since February 2015.
The Ifo survey “has brought the strongest signal yet that the recent global economic concerns and associated final market gyrations have started to hit the eurozone’s biggest economy”, said Capital Economics economist Jonathan Loynes.
London and Paris also ended in the red, although commodity trading and mining company Glencore led a mixed bag of risers on London’s FTSE-100 index with a 4.4% advance as traders fretted about oil’s ongoing price travails.
“Oil remains the adjustment variable for the market,” said Renaud Murail of Barclays Bourse in Paris.
“It is the hot topic which betrays investor anxiety,” said Murail, warning the low prices put pressure on producer states while fuelling fears of the state of global growth.
US stocks opened lower as oil prices fell to start a week with a Federal Reserve policy meeting and earnings from the likes of Apple and Boeing ahead.
Two hours into trade, the Dow Jones Industrial Average was at 16,011.36, down 0.5%, with the broad-based S&P 500 off 0.4% and the tech-rich Nasdaq Composite Index slipping 0.5%.
“It’s been a volatile start to the week in financial markets and that doesn’t look like abating in the final week of the month, as the Federal Reserve and Bank of Japan announce their latest monetary policy decisions, we get a number of key economic releases and corporate earnings season gets into full swing,” said Craig Erlam, senior market analyst at Oanda trading group.
After global equities enjoyed sharp gains on Friday, Asian trading floors moved forward, led by Hong Kong, Tokyo and Sydney.
There will be close scrutiny this week of the Bank of Japan after a recent report said policymakers were considering ramping up its already vast stimulus programme to avert a deflation threat exacerbated by plunging oil prices.
That came a day after the head of the European Central Bank, Mario Draghi, said he would consider further easing of the eurozone’s monetary policy.
There is also increasing speculation that the Fed will delay another interest rate rise for now, having increased the cost of borrowing in December for the first time in a decade.