Crude prices slide below $30, pulling equities sharply lower – Gold firms on weaker dollar, stocks

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NEW YORK, Jan 15, (Agencies): Oil prices dove below $30 a barrel on Friday, dragging major equity indices around the world sharply lower, as fears of a global slowdown amid a crude supply glut roiled markets and unsettled investors who snapped up gold and other safe-haven assets.

Major stock indices in Europe and on Wall Street tumbled more than 2 percent while crude prices slid on expectations Iran will increase oil exports once international sanctions are lifted, possibly within days.

Yields on the benchmark 10-year US Treasury note were poised to fall below 2 percent and gold rose as retreating oil prices and equity markets underpinned demand for assets perceived as safer.

The December futures contract on the federal funds rate surged to its highest since October, implying the Federal Reserve will raise rates only one more time this year.

The Australian, New Zealand and Canadian dollars all sank against the US dollar on the back of another slide in Chinese stock markets and the slide in oil. But the dollar fell against both the euro and yen.

World stock markets were set for a third week of losses. European shares fell to their lowest since December 2014, hit by losses in commodity-related stocks after BHP Billiton announced a $7.2 billion writedown on its US shale assets.

BHP shed 6.9 percent, the second-biggest decliner on the pan-European FTSEurofirst 300 index, which fell 3 percent. MSCIÕs all-country world stock index fell 2 percent.

ÒOil is deeply oversold. The stock market is deeply oversold. The inability for the market to rally from deeply oversold conditions clearly tells you how weak the market is,Ó said Adam Sarhan, chief executive of Sarhan Capital in New York.

The Dow Jones industrial average fell 380.56 points, or 2.32 percent, to 15,998.49. The S&P 500 slid 43.44 points, or 2.26 percent, to 1,878.4 and the Nasdaq Composite lost 127.38 points, or 2.76 percent, to 4,487.63.

US crude futures were down more than 5 percent at $29.59 a barrel, after posting their first significant gains for 2016 in the previous session. Earlier they hit $29.28, the lowest since November 2003.

The March Brent contract traded 4 percent lower at $29.62, after hitting a 12-year low of $29.30 earlier in the day.

US

US stocks sank in volatile trading on Friday, with the S&P 500 hitting its lowest since Aug. 24 and the Dow dropping more than 400 points, as oil prices dived below $30 per barrel.

All 10 major S&P sectors in the red and all 30 Dow components lower. The Russell 2000 small-cap index fell as much as 3.1 percent to its lowest since July 2013.

The beaten-down energy sectorÕs 3.36 percent slide led the declines, as oil prices fell 5 percent. The technology sector was down 3.44 percent, as IntelÕs weak report weighed heavily on chip stocks.

US economic data on Friday was also not very encouraging, with an unexpected drop in retail sales and industrial output declining again in December, underscoring a worsening outlook for fourth-quarter economic growth.

At 12:08 p.m. ET (1708 GMT), the Dow Jones industrial average was down 418.05 points, or 2.55 percent, at 15,961.

The S&P 500 was down 49.46 points, or 2.57 percent, at 1,872.38. It fell to a low of 1,869.53.

The Nasdaq Composite index was down 154.21 points, or 3.34 percent, at 4,460.80. It hit its lowest since Aug. 24.

The S&P 500 has fallen 12.3 percent and the Dow 13.1 percent from their highs in May, pushing them into what is generally considered as Ôcorrection territoryÕ.

The CBOE volatility index jumped as much as 29.2 percent to 30.95, itÕs highest since September.

Dow components Exxon and Chevron were down 2-4 percent, while Caterpillar dropped 4 percent.

Intel tumbled 9 percent to $29.66 after its results and forecast raised concerns about the chipmakerÕs growth. That weighed on the chip index, which fell 4.5 percent, its steepest drop since March.

Citigroup was down 6.5 percent at $42.44, while Wells Fargo fell 3.2 percent to $49.04, after reporting largely in-line quarterly earnings.

Wynn Resorts was the among the very few bright spots, rising 9.1 percent to $56.28 after reporting in-line of quarterly revenue.

Declining issues outnumbered advancing ones on the NYSE by 2,823 to 251. On the Nasdaq, 2,491 issues fell and 295 advanced.

The S&P 500 index showed no new 52-week highs and 115 new lows, while the Nasdaq recorded four new highs and 428 lows.

Europe

European shares fell on Friday to their lowest since December 2014, hit by losses in commodity-related stocks as BHP Billiton announced a major writedown and oil fell below $30 a barrel.

Some investors said stocks were deeply oversold and flagged hopes of more central bank intervention to help reverse the trend after three straight week of losses.

BHP Billiton shed 6.8 percent, the top faller on the pan-European FTSEurofirst 300, after saying it would write down the value of its US shale assets by $7.2 billion. That cemented expectations the company will be forced to cut its dividend for the first time in more than 25 years.

The STOXX Europe 600 Basic Resources index was down 6 percent, with Rio Tinto, Glencore and Antofagasta also among top fallers.

All four stocks also suffered from target price cuts by Japanese bank Nomura. Copper has hit a new 6-1/2 year low this week and was set for its second straight weekly loss.

The oil and gas sector was also under pressure, down 3.7 percent. Brent and US crude both fell below $30 a barrel, as markets braced for more oil supply from Iran.

ÒStocks are being driven by oil, and given that the Iranian sanctions are due to be lifted, thatÕs causing even more nervousness about this glut of oil that we have,Ó said Zeg Choudhry, managing director of LONTRAD.

The FTSEurofirst 300 was down 3 percent at 1,294.69 points by 1514 GMT, set for its third straight weekly loss. It fell 6.7 percent last week when China allowed its currency to devalue and is down another 1.7 percent.

The European Central Bank holds its next policy meeting on Thursday.

Among other fallers, Brenntag dropped 5.1 percent after the chemicals firm was cut to ÒholdÓ from ÒbuyÓ by Deutsche Bank.

The top riser was Syngenta, up 2.6 percent, following a Bloomberg report saying its board had voted in favour of pursuing advanced takeover talks with ChemChina.

H&M was up 1 percent after it posted a rise in sales in December which beat forecasts.

UK

BritainÕs top share index fell to its lowest closing level in more than three years on Friday, hit by losses in commodity-related stocks as BHP Billiton suffered a major writedown and oil fell below a key level.

The blue-chip FTSE 100 equity index ended down 1.9 percent at 5,804.10 points Ñ its lowest closing level since late 2012.

The FTSE is some 20 percent below a record high of 7,122.74 points reached last April and 7 percent down since the start of 2016.

Concerns over China, the worldÕs second-biggest economy and biggest consumer of metals, have hit oil and metals prices.

Oil fell below the $30 level on Friday, knocking down shares in BP and Royal Dutch Shell, while copper prices also slid to their lowest level since May 2009.

Mining stocks suffered a further blow after BHP Billiton said it would write down the value of its US shale assets by $7.2 billion due to the bleak outlook for oil prices, increasing concerns it will be forced to cut its dividend for the first time in over 25 years.

BHP Billiton fell 6.4 percent, while Anglo American slumped 11.5 percent. Glencore also fell 6.5 percent.

“This is a commodity-driven fall on the markets. Oil has gone below $30, and thatÕs added to fears. ItÕs very difficult to call the bottom of this market,” said Thames Capital MarketsÕ trader Daniel Woodward.

Price comparison site Moneysupermarket, which is in the FTSE 250 mid-cap index, plunged 10.7 percent after reporting a bigger-than-expected fourth-quarter contraction in its insurance unit.

However, gold miner Randgold rose 3.7 percent.

Randgold was the best-performing stock on the FTSE 100 as it benefited from a rise in the price of gold itself, which typically gains in value when there are fears about the global economy, due to goldÕs status as a safe-haven asset.

Asia

The volatility that has characterised the start of the year extended into another session Friday, with beleaguered Asian markets mostly falling with investors rushing to the sidelines after some early promise.

The day started well following a surge on Wall Street but momentum faded in the afternoon as the common themes of falling oil prices and ChinaÕs struggling economy Ñ which have wiped trillions off world markets so far in 2016 Ñ resurfaced.

Shanghai again led the losses, ending 3.6 percent down and entering a bear market, a term defined as a 20 percent fall from a recent high.

The loss topped off a rollercoaster week as a better-than-expected reading on Chinese trade failed to eradicate worries about the economy, which is at its weakest in 25 years.

The losses followed a near two percent rise Thursday, which reports said was fuelled by government cash buying key state-backed companies.

The index has now fallen almost 20 percent since the end of last year as ChinaÕs leaders struggle to get a grip on the growth slowdown. Their bungling of the crisis, and their recent weakening of the yuan currency, has reverberated globally.

Tokyo fell 0.5 percent, Sydney lost 0.3 percent, Seoul shed 1.1 percent and Singapore slipped 0.5 percent in late trade. Hong Kong slipped 1.5 percent. However, there were gains in Wellington, Taipei and Manila.

“The week has certainly been unpredictable and very volatile,” Geoffrey Ng, a Kuala Lumpur-based director at Fortress Capital Asset Management, told Bloomberg News.

He added that as regional markets have fallen “weÕre seeing opportunities emerge”, although he said it was hard to gauge what the trend will be in the next few weeks.

US dealers opened the door to a bright trading day, with all three Wall Street indexes ending sharply higher.

Tokyo Ñ Nikkei 225: Down 0.5 percent at 17,147.11 (close)

Shanghai Ñ Composite: Down 3.6 percent at 2,900.97 (close)

Hong Kong Ñ Hang Seng: Down 1.5 percent at 19,520.77 (close)

Oil

Brent crude futures clawed back from 12-year lows on Friday, but intense downward pressure remained as the market braced for increased Iranian oil exports once international sanctions are lifted, possibly within days.

Brent and US crude oil are on track to close lower for a third consecutive week, down roughly 20 percent from their 2016 highs.

The International Atomic Energy Agency is expected soon to issue its report on IranÕs compliance with an agreement to curb its nuclear programme, potentially triggering the lifting of Western sanctions.

US crude futures were down more than 4 percent at $29.90 per barrel at 1445 GMT, after posting their first significant gains for 2016 in the previous session. Earlier they hit $29.28, the lowest since November 2003.

The March Brent contract climbed back to $30 per barrel, trading 80 cents lower at $30.08, after hitting a 12-year low of $29.30 earlier in the day.

PVM analyst Tamas Varga said that while there could be short-covering, the focus would return to oil market oversupply.

“The general long-term trend is that we are going down,” Varga said of prices.

“The key theme for 2016 will be real fundamental adjustments that can rebalance markets to create the birth of a new bull market, which we still see happening in late 2016,” Goldman said in a report.

Others were more concerned about the impact of new exports from Iran. While experts warned that not all sanctions may be lifted immediately once the agreement comes into effect, any additional oil would add to a glut that has pushed prices into a deep slump since mid-2014.

“In the very short term, another price drop cannot be excluded in particular after sanctions against Iran are being lifted,” Commerzbank analyst Carsten Fritsch told Reuters Global Oil Forum.

“That means a drop towards $25 is quite possible, but not much lower than that.”

The oil price collapse has hammered currencies from commodity-producing nations and spooked financial markets as investors worry about the health of the global economy.

Even before sanctions are lifted, IranÕs oil exports were on target to hit a nine-month high in January, with 1.10 million barrels a day of crude, excluding condensate, to load.

Gold

Gold rose on Friday, after dropping for four of the past five sessions, as falling equity markets underpinned demand for assets perceived as safer.

European shares dropped, following losses in Asian markets, to 3-1/2-year lows on renewed oil price weakness and disappointing Chinese data.

Spot gold rose 0.6 percent to $1,084.28 an ounce by 1256 GMT, while US gold futures gained 1 percent to $1,084.10. Spot gold was down nearly 2 percent for the week, the biggest weekly loss since Nov 6.

“We have had a good start to the year, with prices trying to consolidate into a higher range between $1,080 and $1,100,” ActivTrades chief analyst Carlo Alberto de Casa said.

“A close above $1,080 would certainly help goldÕs case, although long-term fundamentals, including the US monetary policy and the oil price weakness represent a risk.”

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