US and European stock markets fall sharply again

Global equity markets dropped to their lowest levels since 2013 on Wednesday to put them on track for one of their worst monthly performances on record, as oil once again tumbled to 13-year lows.

The MSCI World equity index slumped 2.6 per cent to its lowest level since July 2013. The index has already dropped 11 percent in January, which if sustained would be the worst monthly loss since October 2008, the month after Lehman Brothers went bankrupt.

The declines left the index down 20.8 per cent from its high on May 22, confirming a bear market on an intraday basis, generally defined as a drop of more than 20 per cent.

Wall Street tumbled more than 2 per cent, with each of the 10 major S&P sectors down more than 1 per cent, led lower by a drop of more than 4 per cent in the energy sector.

In Dublin, the Iseq index of leading shares was down 2.6 per cent at 6,194.83.

Nearly 200 stocks in the benchmark S&P were down 20 per cent or more from their 52-week high. The Dow Jones industrial average fell 358.34 points, or 2.24 per cent, to 15,657.68, the S&P 500 lost 43.99 points, or 2.34 per cent, to 1,837.34 and the Nasdaq Composite dropped 110.68 points, or 2.47 per cent, to 4,366.28.

There have been steeper monthly drops only four times in the MSCI World index’s 28-year history, two of which occurred during the financial crisis in 2008. “The focus remains on oil and the impact of low oil prices, which points to slowing growth and possibly, even stagnant to negative growth here in the United States,” said Peter Cardillo, chief market economist at First Standard Financial in New York.

US crude wallowed at its lowest since 2003 after the International Energy Agency warned the market could "drown in oversupply". Germany's DAX, France's CAC and Britain's FTSE were all down more than 3 per cent and also heading for their biggest falls of the year so far. Another key commodity, copper, slipped 1.1 percent, driving falls of 4.2 and 3.9 per cent respectively in Europe's basic resources and energy sectors.

Oil shares in Europe are down more than 14 per cent already this year and at their lowest levels since 2003.

Asian stocks were down sharply, and Wall Street saw its rally swamped overnight as US crude sank beneath $28 a barrel for the first time since 2003, hammering energy stocks and boosting safe havens.

The benchmark Shanghai Composite Index closed down a fraction over 1 per cent after a 3.25 per cent bounce on Tuesday , while the CSI300 index of the largest listed companies in Shanghai and Shenzhen lost 1.5 per cent, having risen 2.95 per cent the previous session.

Tuesday’s jump was fuelled by expectations that the People’s Bank of China (PBOC) would soon act to loosen monetary policy further after the latest data confirmed economic growth hit a 25-year low last year. The indexes are down 15-16 per cent so far in 2016 after a series of sharp sell-offs.

On Tuesday, the statistics bureau also released weaker-than-expected readings on industrial output and retail sales for December, while the Commerce Ministry said on Wednesday that foreign direct investment fell in the final month of the year, and China's external trade faced relatively severe pressure in 2016.

- Reuters