European stock markets fell yesterday as traders reacted to further declines in oil prices and political turmoil inGreece which pushed the euro to a 29-month low.
Crude futures hit the lowest levels for five-and-a-half years, while the euro struck $1.2124, its lowest point since July 2012, before rebounding.
London’s benchmark FTSE 100 index sank 1.36% to end the day at 6,547 points, as heavyweight energy companies retreated on sliding oil prices.
On its last trading day of the year, Frankfurt’s DAX 30 shed 1.22% to close at 9,805.55 points. It rose by a modest 2.65% over the year as weak eurozone growth weighed on Germany, Europe’s biggest economy.
Markets have also been hit by weaker growth in China that has offset stronger expansion in the US.
The CAC 40 in Paris dropped 1.68% to close at 4,245.54 points in mid-afternoon deals compared to Monday’s close.
“The political uncertainty in Greece has limited any potential for a rebound in the European equity markets due to renewed concerns regarding the eurozone’s economic prospects,” said Myrto Sokou, senior
research analyst at Sucden Financial.
Wall Street followed the slumping European equity markets on euro member Greece’s political crisis with US stocks slightly lower in early trade yesterday.
Weighing also on European shares yesterday was the latest plummet in oil prices.
“The energy-heavy FTSE didn’t have much hope for a strong start to Tuesday, with the record low oil prices,” said Connor Campbell, analyst at Spreadex trading group.
Shares in Royal Dutch Shell closed down 2.20%, BP gave up 2.08%, while Total retreated 2.77% in Paris trade.
Crude oil prices struck low points yesterday, as analysts predict rising US production despite a global supply glut.
New York’s West Texas Intermediate (WTI) dropped to $52.70 a barrel—the lowest level since May 2009.
Brent North Sea crude slid to $56.74, also a five and a half year low.
WTI for delivery in February later recovered to $53.38 a barrel, down 23 cents from Monday’s close.
Brent rebounded to $57.18, but still down 70 cents from Monday.
“Oil prices have once again touched new lows over longer term concerns about US production levels,” Michael McCarthy, chief market strategist at CMC Markets in Sydney, told AFP.
Oil has shed about half its value since June, attributed to slowing growth in China and emerging-market economies, a recession in Japan and a near-stall in the eurozone.
On top of that, the Opec last month said it would maintain output levels despite ample global supplies, in part due to cheaper oil extracted from North American shale rock.
Greece’s Prime Minister Antonio Samaras said yesterday a snap election planned for January 25 would determine whether his country remains in the eurozone.
“This struggle will determine whether Greece stays in Europe,” Samaras said, as he asked the president to dissolve parliament ahead of the poll.
There are fears that the anti-austerity, far-left Syriza party could win and roll back measures required under Greece’s IMF-EU bailout, in turn further weakening the eurozone economy.
The events have raised concerns of a return to the crisis of 2010 when Greece, unable to service its debts and facing an exit from the eurozone, was forced into taking handouts from the IMF and European Union.
“For now the situation is more a political crisis than a financial one, but the re-ignition of the eurozone problem is certainly an unwelcome development after a year in which many thought the crisis had left us for good,” said David Madden, market analyst at IG traders.